President Donald Trump wants to simplify the personal tax code by cutting rates and eliminating deductions used by more affluent Americans.
White House economic adviser Gary Cohn says the plan would cut the top income tax rate from 39.6 percent to 35 percent. It also would reduce the number of personal income tax brackets to three from seven. The new tax rates would be 10 percent, 25 percent and 35 percent.
The plan would double the standard deduction for married couples to $24,000, while keeping deductions for charitable giving and mortgage interest payments. The plan would trim other deductions used by high-income Americans, including state and local tax payments.
It would also repeal the estate tax, the catch-all alternative minimum tax and the 3.8 percent tax on investment income from President Barack Obama’s health care law.
WASHINGTON — President Donald Trump is proposing “the biggest tax cut” ever, even as the government struggles with mounting debt, in an effort to fulfill his promises to stimulate job creation and middle class prosperity.
White House officials on Wednesday were to release broad outlines of a tax overhaul that would provide massive tax cuts to businesses big and small. The top tax rate for individuals would drop by a few percentage points, from 39.6 percent to the “mid-30s,” according to an official with knowledge of the plan.
Small businesses would see their top tax rate go from 39.6 percent to the proposed corporate tax rate of 15 percent, said Treasury Secretary Steven Mnuchin in a Wednesday morning speech.
Mnuchin said the proposed overhaul would amount to “the biggest tax cut” and the “largest tax reform” in U.S. history. He said the lower tax rate for small business owners — a category that under current legal definitions could include doctors, lawyers and even companies such the Trump Organization — would not be used as a loophole for the rich to reduce their tax burden.
But the Treasury secretary declined to say there would be no absolute tax cut for the wealthy, a promise he made last year during a TV interview. “Our objective is simplifying personal taxes,” he said.
The plan will not include provisions to increase spending on infrastructure projects, one possible sweetener that could help gain congressional support.
The proposal faces a massive hurdle in that lower rates would blow a hole in the budget, possibly causing the national debt to soar by more than a trillion dollars over a decade.
Without additional revenue sources to offset the tax cuts, the broad proposal would need Democratic support to clear the required 60 votes in the Senate. Congressional Republicans could pass changes on their own with a simple Senate majority, but that would only be temporary under Senate rules.
Mnuchin said he would like the tax overhaul to be permanent, but “if we have them for 10 years, that’s better than nothing.”
Trump sent his team to Capitol Hill Tuesday evening to discuss his plan with Republican leaders.
“They went into some suggestions that are mere suggestions and we’ll go from there,” said GOP Sen. Orrin Hatch of Utah, chairman of the Senate Finance Committee.
The White House’s presentation will be “pretty broad in the principles,” said Marc Short, Trump’s director of legislative affairs.
In the coming weeks, Trump will solicit more ideas on how to improve the plan, Short said. The specifics should start to come this summer.
Short said the administration did not want to set a firm timeline, after demanding a quick House vote on a health care bill and watching it fail.
But, Short added, “I don’t see this sliding into 2018.”
Republicans who slammed the growing national debt under President Barack Obama have said they are open to Trump’s tax plan, even though it could add trillions of dollars to the deficit over the next decade.
Echoing the White House, Republicans argue the cuts would spur economic growth, reducing or even eliminating any drop in tax revenue.
“I’m not convinced that cutting taxes is necessarily going to blow a hole in the deficit,” Hatch said.
“I actually believe it could stimulate the economy and get the economy moving,” he said. “Now, whether 15 percent is the right figure or not, that’s a matter to be determined.”
The argument that tax cuts pay for themselves has been debunked by economists from across the political spectrum.
On Tuesday, the official scorekeeper for Congress dealt the argument — and Trump’s plan — another blow.
The nonpartisan Joint Committee on Taxation said a big cut in corporate taxes, even if temporary, would add to long-term budget deficits. This is a problem for Republicans because it means they would need Democratic support in the Senate to pass a tax overhaul that significantly cuts corporate taxes.
Republicans have been working under a budget maneuver that would allow them to pass a tax bill without Democratic support in the Senate, but only if it doesn’t add to long-term deficits.
Senate Majority Leader Mitch McConnell, R-Ky., said the Senate was sticking to that strategy.
“Regretfully we don’t expect to have any Democratic involvement in” a tax overhaul, McConnell said. “So we’ll have to reach an agreement among ourselves.”
Democrats said they smell hypocrisy over the growing national debt, which stands at nearly $20 trillion. For decades, Republican lawmakers railed against saddling future generations with trillions in debt.
But with Republicans controlling Congress and the White House, there is no appetite at either end of Pennsylvania Avenue to tackle the long-term drivers of debt, Social Security and Medicare. Instead, Republicans are pushing for tax cuts and increased defense spending.
“I’m particularly struck by how some of this seems to be turning on its head Republican economic theory,” said Sen. Ron Wyden of Oregon, the top Democrat on the Senate Finance Committee.