By Ryan Velez
The president and top congressional Republicans have agreed on a tax overhaul outline, and the LA Times reports that businesses stand to get massive tax cuts and the exact benefits individuals are going to see are a bit murkier.
“Trump will pitch what the party is calling its “unified tax reform framework” during a speech in Indianapolis on Wednesday. Crucial details still must be worked out by lawmakers as they try to craft legislation and pass it by the end of the year,” the Times explains. However, there are already some issues, with Republicans admitting that it will initially add to the budget deficit. However, their rationale is that stronger economic growth will even things out. Democrats, pointing out the history of other tax cuts, are arguing otherwise.
People familiar with the plan say that it will slash the corporate tax rate to 20%, not as low as Trump wanted, but still the lowest since 1940. Most foreign earnings would not be taxed at all. “Pass-through” businesses that pay taxes through the individual code — from mom-and-pop operations to large partnerships such as law firms and hedge funds — would see their top tax rate drop to 25% from 39.6%.
In terms of individuals, there are a lot more questions on who will benefit. The current seven tax brackets would be reduced to three: 12%, 25%, and 35%. Congress has yet to determine what the income levels are for those brackets. The lowest tax bracket would increase from the current 10%. And the highest current tax bracket of 39.6%, which applies to income over $418,400 for single filers, would be eliminated. The estate tax would also be eliminated, which primarily affects the wealthy.
Several individual deductions will be eliminated in an attempt to simplify the tax code, the most notable being the deduction for payment of state and local taxes. Californians received $101 billion from the deduction — nearly a third of the total value of the deduction nationwide — in 2014, according to the nonpartisan Tax Foundation.
The outline is coming with the promise of tax relief for the middle class, but how that will come to pass is unclear. "We will cut taxes tremendously for the middle class. Not just a little bit, but tremendously," Trump told reporters at the White House on Tuesday after meeting with Republicans and Democrats on the tax-writing House Ways and Means Committee.