On Sept. 27, Republicans released a nine-page-long framework for tax reform. President Trump endorsed the plan, saying it will make the U.S. economy more competitive and help middle-class families. Most Democratic criticism calls the plan a give-away to wealthy elites.
Under the new plan, citizens’ standard deduction is doubled, up to $12,000 per citizen and $24,000 per family. Additionally, the tax credit for child dependents will be increased while taxpayers can earn credits for non-child dependents. The estate tax is also eliminated. The plan has three income tax brackets at 12%, 25%, and 35%, although the framework does not include the income boundaries for each tax bracket. The White House says they are flexible to having a higher top tax rate, and larger deductions will make up for the 2% increase in the bottom tax bracket.
The corporate tax rate is to be lowered from 35% to 20%, with “pass-through entities” such as LLCs paying 12-25% depending on their revenue.
The tax plan does not outline what tax benefits will be cut to compensate for the revenue cuts. The Committee for a Responsible Federal Budget’s early analysis says that the plan will lead to $2.2 trillion in cuts over the next decade. Social Security, Medicare, and Military spending, the most expensive programs in the federal budget, will likely be restricted with the decreased federal revenue.
If passed, this would be the first overhaul of the federal tax code since Reagan’s reform in 1986.