Washington — Republicans on Capitol Hill on Wednesday released the details of their tax reform plan. Among the changes..
The Corporate Tax would be cut from 35% to 20% [up from Trump’s 15% proposal ]
It lowers the upper rate from 39.6% to 35%
And it creates just three marginal tax brackets, down from the current seven brackets. Those new brackets would be 12%, 25% and 35%
A common criticism of tax cut proposals in the past, is that the majority of the benefits goes to the wealthy. On one hand this makes simple mathematical sense, as a reduction in tax rates has a greater impact on those who pay the most in taxes.
Currently, the top 1% of income earners pay 37.8% of all taxes. The top 5% pay 58.55%, and the top 10% of earners now pay nearly 70% of income taxes, based upon IRS figures from 2015.
To offset the argument that only the wealthy benefit, the tax plan nearly doubles the personal exemption for individuals to $12,000, and offers an exemption of up to $24,000 for a family. So even lower income earners would keep more of their money under the plan.
The plan would keep the deduction for mortgage interest and for donations to nonprofit organizations. But a lot of the current deductions offered in the tax code would be eliminated, so that while the rates are lowered for some wealthy earners, their adjusted gross incomes may well rise as they are unable to take as many deductions.
One of the key issues being debated, is whether to keep the deductions for state and local taxes.
This is a key proposal for the Trump Administration and for Republicans in Congress, who’ve promised in the campaign to cut taxes, in an effort to spur the economy. This proposal is NOT aimed at being “revenue neutral” which would mean there would be cuts to offset the alleged loss of revenue by cutting the tax rates.
Three Democratic senators, Joe Donnelly from Indiana, Heidi Heitkamp from North Dakota, and Joe Manchin, from West Virginia, are thought to be possible votes in favor of the tax cuts. All three of these Democratic Senators are up for re-election in 2018, in states carried by President Trump.
In fact, Sen Joe Donnelly flew back to Indiana with President Trump on Air Force One, as the President prepared to deliver his remarks in Indianapolis.
In a statement issued by his office, Sen Donnelly said, “It’s an honor to welcome President Trump to Indiana, and I hope he has an opportunity to hear directly from Hoosiers on an issue that impacts not only our families but our economy.”
With the possible support from some on the Democratic side of the aisle, the potential for a tax cut passing, is thought to be more likely than the doomed efforts to replace Obamacare that’s failed four times this year.