REVEALED: Here are all the details of Trump's massive tax cut plan
On February 9, President Donald Trump told a gathering of manufacturing CEOs at the White House he would release something in "two or three weeks that will be phenomenal in terms of tax."
On Wednesday, almost 10 months later, that tax plan is finally here — most of it, at least.
Trump and the "Big Six" group of Republican tax negotiators rolled out the most detailed look yet at the massive Republican tax reform plan. It is the opening salvo of what will likely be a long process to attempt to overhaul the tax code.
"Too many in our country are shut out of the dynamism of the U.S. economy, which has led to the justifiable feeling that the system is rigged against hardworking Americans," the nine-page plan reads. "With significant and meaningful tax reform and relief, we will create a fairer system that levels the playing field and extends economic opportunities to American workers, small businesses, and middle-income families."
While Republican leaders and the White House want to complete it by the end of the year, Wall Street and political analysts believe the most likely scenario is that a bill could pass by early 2018.
The "Big Six" — made up of National Economic Council Director Gary Cohn, Treasury Secretary Steven Mnuchin, Senate Majority Leader Mitch McConnell, Senate Finance Committee Chair Orrin Hatch, House Speaker Paul Ryan, and House Ways and Means Committee Chair Kevin Brady — has been meeting over the past few months to hash out the details of the tax plan.
More on 'Big Six' member Steven Mnuchin
Key elements are still missing from the plan, to avoid early pressure from industry groups and lobbyists. Here's what is in the initial version (the full text of the plan is at the bottom of this page):
A 20% corporate tax rate: This will be the first time Trump publicly backs down from his promise of a 15% corporate tax rate, one of his earliest campaign promises. The budget math required for a 15% rate was too difficult, so the somewhat higher rate will be the opening bid. That would still bring the current 35% statutory federal rate down significantly.
A 25% rate for pass-through businesses: This would apply to people who own their own business. Instead of getting taxed at an individual tax rate for business profits, owners of firms would pay at the pass-through rate. The plan also said it will consider rules to prevent "personal income" from being taxed at this rate. Secretary Mnuchin suggested previously there may be limitations to what types of businesses get this rate. It could apply only to goods-producers and not service-oriented companies, to prevent people from creating limited liability corporations to store their assets and receive a lower rate.
Elimination of some business deductions, industry-specific incentives, and more: There were little details given, but the plan includes language regarding the "streamlining" of business tax breaks.
A bottom individual tax rate of 12%: The plan is designed to have three tax brackets (for now), with the lowest tax rate being 12%. This will be a slight bump in the bottom bracket, as it now sits at 10%. People currently in the 15% marginal tax bracket are likely included here.
A middle tax bracket of 25%: It's not specified what incomes fall into this bracket.
The top individual tax rate of 35%: That would be down from the current top rate of 39.6%.
A larger standard deduction: To avoid raising taxes on those currently in the 10% tax bracket, the standard deduction for all taxes would be doubled to $12,000 for individuals — up from $6,350 — and $24,000 for married couples — up from $12,700. These are slightly less than the doubled deduction expected.
Eliminates most itemized deductions: While not specifically named, the only deduction preserved in the plan explicitly are for charitable gifts and home mortgage interest.
Vague promises on retirement savings and other deductions: There are sections of the plan referring to retirement savings and other "provisions" but not much detail is given.
Elimination of the state and local tax deduction: The SALT deduction allows people to deduct what they pay in state and local taxes from their federal tax bill. This deduction is mostly taken by wealthier Americans in Democratic states. Around one-third of the benefits from people using the SALT deduction comes from New York, New Jersey, and California.
Elimination of the estate tax: Called the "death tax" in the plan, this tax only applied to inherited assets totaling $5.49 million or more in 2017. Very few households pay the estate tax, but it has been a long-time target for Republicans.
One-time repatriation tax: This would be a lower, one-time rate for companies to bring back cash held overseas. Officials have indicated the rate could end up somewhere around 10%. Additionally, reports suggest the repatriation may be mandatory for firms.
The Republican drive to pass a tax plan as soon as possible has intensified with the failure to repeal and replace the Affordable Care Act. Going into the second year of Trump's presidency and the start of the midterm election season with no major legislative victories could prove disastrous for the party.
The tax issue, while an imperative for the GOP, could be complicated due to the continued desire to address health care.
Republicans have planned to pass the tax reform bill via budget reconciliation. The process would allow the plan to pass on a simple majority vote in the Senate, avoiding a Democratic filibuster. Some GOP members, however, have suggested combining another attempt at Obamacare repeal with the tax bill for the 2018 reconciliation — making a difficult undertaking even more complicated.
From here, the outline of the tax plan will go to the two committees with jurisdiction over tax legislation — one in each chamber — to craft the blueprint released today into a workable bill.
Then, Congress must pass a budget — with reconciliation instructions included.
Click here for the full release of the plan
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See Also:
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Conservatives are drawing a red line that could doom the GOP's tax reform efforts
SEE ALSO: Trump's tax plan would actually raise the lowest tax rate — but there's a catch
