Trump Calls for Deep Cuts in Business Taxes, Changes for Individuals
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Broad package seeks to spark sustained 3% economic growth; Democrats hint at objections.
President Donald Trump called for deep reductions in business tax rates and major changes to the individual tax system in a bid to reinvigorate his economic and legislative agenda as he nears the 100-day mark of his presidency.
The plan largely hews to tax-cut proposals Mr. Trump made during his presidential campaign last year, but it includes several crucial changes. Most notably, Mr. Trump is proposing to repeal a provision of the tax code that allows individuals to deduct the state and local taxes they pay from their reportable income. That will hurt residents of high-tax states such as New York, New Jersey and California and spur objections from some Republican lawmakers in those states.
The plan doesn’t eliminate the exemptions for home-mortgage interest and charitable contributions. The two deductions are among the most popular for individual U.S. taxpayers, making them two of the most costly for the federal government.
Mr. Trump is also proposing a 35% top tax rate for individuals, down from today’s 39.6% rate but above the 33% rate he backed during the campaign. Lower brackets would be set at 10% and 25%, and the standard deduction for individuals would be doubled.
The corporate tax rate would drop to 15% from 35%, and U.S. companies would owe little or no U.S. tax on their future foreign profits. The tax rate on business income reported on individual returns would also drop to 15% instead of being taxed at individual tax rates.
The estate tax and alternative minimum tax would be repealed.
Mr. Trump’s plan leaves several crucial issues unresolved, including whether companies could immediately write off capital expenses, where to set the one-time tax rate on U.S. companies’ stockpiled foreign earnings, how a break for child care would be structured and where the tax brackets for individuals would be set.
Treasury Secretary Steven Mnuchin and Gary Cohn, the director of Mr. Trump’s National Economic Council, said those issues would be worked out later, partly in negotiations with Congress.
“Clearly we have a unique opportunity to do something major here,” Mr. Cohn told a small group of reporters in the White House on Wednesday morning. “It’s our intention to create a huge tax cut and equally as important, a huge simplification of the tax system in America.”
Mr. Trump’s tax agenda is headed for a challenging road through Congress, where budgetary hurdles and complex politics could make it difficult for him to get a quick victory. Unless he can attract Democratic votes—which appears unlikely—the plan must comply with legislative procedures that allow for a party-line vote in the Senate.
The key to those procedures: Any tax plan can’t increase budget deficits beyond a 10-year period.
Mr. Trump’s team intends to argue that his tax cuts will spur economic growth and increase revenue, which will help to avert increased deficits. But lawmakers and Congress’s nonpartisan tax policy scorekeepers—the Joint Committee on Taxation—need to agree with that assessment to proceed.
“The combination of tax reform, tax cuts, regulatory relief and trade policies are what will get this country back to its proper sustained economic growth,” Mr. Mnuchin said.
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