Republican leaders on Wednesday rolled out a framework for rewriting the tax code that they hope will be a starting point for tax reform legislation this year.
The nine-page document, titled “Unified Framework for Fixing Our Broken Tax Code,” would cut the corporate tax rate from 35 percent to 20 percent, collapse the seven individual income-tax brackets to three, and slash the rate for “pass-through” small businesses to 25 percent. The plan would also roughly double the standard deduction to $24,000 for married families and $12,000 for individuals, and preserve popular tax deductions that encourage people to buy homes and give money to charity.
Ways and Means Committee Chairman Kevin Brady (R-TX) emphasized that the White House, Ways and Means Republicans and Senate Finance Republicans are all firmly behind the plan released this week.
“After years of work, we are moving forward with a unified framework that paves the way for bold, transformative tax reform – tax reform that will bring more jobs, fairer taxes, and bigger paychecks,” Brady said. “We have a lot of work ahead. But this moment marks a major step forward in the process.”
The plan does not, however, answer some important questions like which tax breaks will have to go away in order to offset trillions of dollars in tax cuts. It also does not specify at which income thresholds the individual brackets will be set. The current top rate is 39.6 percent, and the framework calls for three individual tax brackets of 12, 25 and 35 percent, which means wealthy taxpayers will see a tax cut.
Republicans did leave open the possibility that an additional top rate may apply to the highest-income earners to ensure that the reformed tax code does not shift any tax burden to middle-income taxpayers. During a meeting at the White House on Tuesday, President Trump assured Democratic lawmakers that the top rate for individuals is negotiable.
Rep. Richard Neal (D-MA), the top Democrat on the Ways and Means panel, said Trump’s promise not to cut taxes for the wealthy is contradicted by the GOP framework released this week.
“Why should the American people believe anything House and Senate Republicans say about their tax plan when they don’t even come close to meeting any of President Trump’s stated goals about tax reform?,” Neal said. “This tax plan would give big tax cuts to the wealthiest Americans, helping the rich get richer while leaving behind working families and middle-class Americans.”
GOP leaders said their goal is to have the tax-writing committees in the House and Senate use the framework to draft legislation they hope will be passed and signed into law by the end of the year. The committees will not introduce their tax bills until both chambers pass a budget, which is expected to include reconciliation instructions that allow Congress to pass tax reform legislation with a simply-majority vote in the Senate. That vote is expected next week.
This article was provided to OSAE by the Power of A and ASAE's Inroads.