The details are out for Trump’s big tax reform plan, even though those details are decidedly vague. In an announcement Wednesday, the White House provided the skeleton of the plan, which would, unsurprisingly, but corporate and individual taxes. They claim it is “fully aligned” with the House and Senate committees currently working on the policy. It would also usher in some unprecedented reforms. Here’s what we know:
—The seven current individual tax brackets would be reduced to three, with new rates: 12 percent, 25 percent, 35 percent (the current highest rate, already low by western standards, is 39.6 percent). There would be an option for a fourth tax rate for the highest-earning individuals, but only if Congress chooses to pursue it, which is unlikely with the current makeup.
—The standard deduction would double, to $12,000 for individuals and $24,000 for married couples. The child tax credit would also increase, though the number is not yet specified, and there would be new credits for “dependents” who are not children.
—The estate tax—which taxes a deceased person’s estate before it is distributed to his or her heirs—and the alternative minimum tax—which establishes a baseline even for those rich entities that have used loopholes or exemptions to reduce their income tax—would be gone.
—Many itemized deductions would be eliminated, though it’s not clear which ones would go, though incentives for contributing to IRAs, along with mortgage deductions, would continue.
—The corporate tax rate would drop from 35 percent to 20 percent.
—Businesses whose income “passes through” to owners (the model for about 95 percent of all businesses) would be subject to a new tax rate of 25 percent, as opposed to the higher individual rate currently assessed. This opens the door for wealthy Americans to incorporate as a business, and thus pay the lower tax rate.
—For at least five years, businesses would have more leeway in writing off business investments.
—The current “worldwide tax system” would shift a “territorial tax system,” which could exempt companies from paying taxes on money earned abroad.
Of course, the fine points will still be left to Congress, including how much such a plan would raise the federal deficit. Per the Times:
A preliminary estimate from the nonpartisan Committee for a Responsible Federal Budget found that the policies in the framework would cost between $2 trillion to $2.5 trillion over a decade.
The Republicans pitching the plan say economic growth will compensate for lost revenue. During the campaign, Mr. Trump said overhauling the tax code would raise economic growth to 4 percent.
Despite the obvious boon for rich individuals and corporations, Trump insisted it was a middle class tax cut. “I don’t benefit,” he said. “Very, very strongly I think there’s very little benefit for people of wealth.”
Not everyone agrees. Here’s what Senator Ron Wyden (D-OR) had to say:
“If this framework is all about the middle class, then Trump tower is middle-class housing. It violates Trump’s tax pledge that the rich would not gain at all under his plan by offering sweetheart deals for powerful CEOs, giveaways for campaign coffers and a new way to cheat taxes for Mar-a-Lago’s loyal members.”