Congressional Republicans on Wednesday unveiled the framework for their long-awaited tax-reform plan, which simplifies the tax system and cuts rates for businesses – while attempting to boost household incomes by nearly doubling the standard IRS deduction used by most Americans.
“This has been a long time coming,” House Speaker Paul Ryan, R-Wis., said at a Capitol Hill press conference where he also pointed out that Washington has not enacted major tax reform in roughly 30 years.
“Instead of a source of pride, our tax code has become a constant source of frustration. It’s too big. It’s too complicated. It’s too expensive. Today, we are taking the next step to liberate America from our broken tax code.”
The framework plan calls for increasing the standard deduction to $12,000 for individuals and $24,000 for families, which essentially doubles the amount of personal income that is tax-free.
Congressional Republicans describe the change as creating a larger “zero tax bracket.”
The stakes are high, after Republicans a day earlier scrapped their latest effort to repeal and replace ObamaCare. Now, the legislative focus will shift to tax reform, which Trump has been eager to tackle since taking office.
The broad-stroke plan was hammered out for months by a half-dozen congressional Republicans and Trump administration officials known as the Big Six.
Ryan spoke Wednesday after congressional Republicans returned from a day trip to nearby Fort McNair, in Maryland, to discuss the proposal, ahead of President Trump’s afternoon speech in Indianapolis about the plan.
He was joined by Senate Majority Leader Mitch McConnell and about a half-dozen other House and Senate Republicans, including Texas Rep. Kevin Brady, chairman of the tax-writing House Ways and Means Committee.
McConnell, of Kentucky, praised Ryan for leading the effort and said the new plan is about “getting America going and growing again.”
The plan also collapses the number of personal tax brackets from seven to three. By simplifying the system, most Americans would be able to file their taxes on a postcard-sized document, a concept Treasure Secretary Steve Mnuchin touted this past spring.
Deductions for mortgage interest and charitable giving would remain, but the plan seeks to end most other itemized deductions that can reduce how much affluent families pay.
The plan also calls for incentives to bring offshore investments back into the country, which Trump said Tuesday would bring at least $2.5 trillion in overseas investment back.
However, any attempt at a bipartisan reform appeared to unravel with minutes of the congressional Republicans announcing the plan.
“It’s clear from this plan that when it comes to tax reform, Republicans will always put the wealthy first,” said Massachusetts Rep. Richard Neal, the top Democrat on the House Ways and Means Committee. “After more than a year of work …. this tax plan would give big tax cuts to the wealthiest Americans.”
Meanwhile, a battle is brewing among Republicans over a move to eliminate the deduction for state and local taxes, which is especially valuable to people in high-tax states such as New York, New Jersey and California. The plan retains existing tax benefits for college and retirement savings such as 401(k) contribution plans.
“As I’ve said from day one, eliminating the federal deduction for state and local taxes will unfairly burden the over 3 million hardworking taxpayers in New York who claim the deduction,” New York GOP Rep. Claudia Tenney said.
The individual tax rates would be 12 percent, 25 percent and 35 percent — and the plan recommends a surcharge for the very wealthy. But it does not set the income levels at which the rates would apply, so it’s unclear just how much of a tax change there might be for a typical family.
The plan would seek to help families by calling for an increased child tax credit and opening it to families with higher incomes. The credit currently is $1,000 per child. Also proposed is a new tax credit of $500 to help pay for the care of the elderly and the sick who are claimed as dependents by the taxpayer.
The estate tax — which is paid by those with multimillion-inheritances — would be eliminated, a boon for wealthy individuals who inherit businesses, investments and real estate.
Corporations, meanwhile, would see their top tax rate cut from 35 percent to 20 percent.
New benefits would be given to firms in which the profits double as the owners’ personal income. They would pay at a 25 percent rate, down from 39.6 percent. This creates a possible loophole for rich investors, lawyers, doctors and others, but administration officials say they will design measures to prevent any abuses.
The plan would also impose a new, one-tax, lower tax on corporate profits stashed overseas, and create a new tax structure for overseas business operations of U.S. companies.
The Associated Press contributed to this report.
Source: Fox News