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HomeSpotlight Story | Bird’s Eye View | Budget & Taxes | Politics & Leadership | Governors | Hot Issues | Once Around the Statehouse Lightly
Last week President Donald Trump and Republican congressional leaders outlined their plan for a sweeping overhaul of the federal tax code. While many details of the plan still have to be worked out, it currently calls for a 4.6 percent reduction in the top tax rate for individuals, from 39.6 percent to 35 percent, and a 15 percent cut in the tax rate for corporations, from 35 percent to 20 percent. It also proposes eliminating taxes on the profits multinational businesses earn outside the United States and allowing such businesses to repatriate past profits at a reduced rate; allowing businesses to write off investment costs immediately rather than deducting them over time; simplifying the tax code by ending many deductions; doing away with the estate tax; and nearly doubling the standard deduction for individuals.
“We want tax reform that is pro-growth, pro-jobs, pro-worker, pro-family, and yes, tax reform that is pro-American,” Trump said at a rally in Indiana last Wednesday.
“This is a revolutionary change, and the biggest winners will be the everyday American workers as jobs start pouring into our country, as companies start competing for American labor and as wages start going up at levels that you haven’t seen in many years,” he said.
But Democrats say the wealthy would benefit most under the GOP plan, given that only individuals earning over $418,000 a year would qualify for the lower top income tax rate and that the estate tax only applies to those with over $5.49 million in assets. Some working families, meanwhile, could end up paying more in taxes because the plan would raise the lowest income tax rate from 10 percent to 12 percent and eliminate personal exemptions, they say.
“Under this plan, the wealthiest Americans and wealthiest corporations make out like bandits, while middle-class Americans are left holding the bag,” said U.S. Senate Minority Leader Chuck Schumer (D-New York).
The National Conference of State Legislatures was also “dismayed” by the plan’s proposed elimination of the federal income tax deduction for state and local tax payments, which has been part of the federal tax code since its inception. The organization said that change would increase the tax burden on “tens of millions of middle-class taxpayers of every political affiliation” and hinder states’ efforts to invest in education and other government services.
And a preliminary estimate from the Committee for a Responsible Federal Budget, a Washington, D.C.-based watchdog group, indicates that the GOP plan includes about $5.8 trillion in tax cuts but only $3.6 trillion in offsetting revenue increases.
“This is a massive tax cut with an insufficient plan to pay for it,” said Maya MacGuineas, the group’s president. (NATIONAL PUBLIC RADIO, WASHINGTON POST, NEW YORK TIMES)