U.S. Treasury Secretary Steve Mnuchin (C) listens to U.S. President Donald Trump speak during a "strategic initiatives" lunch at the White House in Washington, U.S., February 22, 2017. REUTERS/Kevin Lamarque
released his highly anticipated tax proposal to lawmakers Wednesday afternoon.
Leading up to announcement, Secretary of the Treasury Steve Mnuchin described the proposal Wednesday morning as the “biggest tax cut and the largest tax reform in the history of our country.”
The bill, which marks the first attempt to overhaul the U.S. tax code since former President Ronald Reagan in 1986, includes features the president floated on the campaign trail. It contains an increase in the standard deduction rate for individuals and a massive cut to the U.S. corporate tax rate. (RELATED: Which Candidate Is Better For Your Bottom-Line: Trump Or Clinton?)
The corporate tax rate is currently the “most complicated and noncompetitive business rate in the world,” Mnuchin said at the White House Wednesday.
Trump’s plan would slash the income tax rate for public corporations from 35 to 15 percent and reduce the top tax rate paid by pass-through businesses from 39.5 percent to 15 percent. The cuts will apply to small businesses and large conglomerates alike.
“In 2017, we are still stuck with a 1988 corporate tax,” National Economic Economic Council Director Gary Cohn said at a White House press briefing Wednesday.
Businesses often decry the U.S. corporate tax rate as too exorbitant and have anxiously awaited Trump’s announcement given his numerous promises for tax and regulatory reform. Financial experts warned hours before the release that if Trump’s proposal failed to address the corporate tax rate the market would be in for a major correction.
“Investors have put a lot of stock behind today’s announcement, and if Trump fails to provide the specifics of his plan or explain how he intends to pay for it, then a pullback below 20,850 points for the Dow Jones and 2,375 points on the S&P 500 wouldn’t surprise us,” Head of Research at ADS Securities Konstantinos Anthis told reporters.
The president also calls for an increase in the standard deduction rate for individuals, which could reportedly put thousands of dollars a year back into Americans pockets.
“We are going to double the standard deduction, so that a married couple won’t pay any taxes on the first $24,000 of income they earn. So, in essence, we are creating a zero tax rate for the first $24,000 a couple earns,” Cohn said Wednesday.
Trump originally promised in August, 2016, to raise the standard deduction rate to $25,000 for single filers and $50,000 for joint filers. The president later revised his plan after Democrats lambasted it to include “a standard deduction of $30,000 for married households and three brackets of 12%, 25%, and 33%,” Scott Greenberg, analyst with the Center for Federal Tax Policy at the Tax Foundation, told The Daily Caller News Foundation.
The Trump administration is also focused on pushing job creation and economic growth. To advance these agendas, Cohn said the plan will return the top capital gains tax rate and dividends rate to 20 percent, “repealing the harmful 3.8 percent Obamacare tax on dividends and capital gains.”
Trump will also repeal the estate-tax, commonly referred to by conservatives as “the death tax.”
Cohn announced that Trump’s proposal will also eliminate the alternative-minimum tax, which requires taxpayers to do their taxes twice to see which amount is higher, Cohn said.
Trump’s plan does not include the highly controversial “border-adjustment” tax (BAT), which both he and members of Republican have pushed for weeks. Mnuchin said Wednesday that the administration still has some concerns about the BAT tax “in its current form,” but will continue discussions going forward with Republican lawmakers that are supporting it.
“We are committed that small business owner-operators will have the benefit of the business rate. What this is not going to be is a loophole to let rich people who should be paying higher rates pay 15 percent,” Mnuchin told reporters.
Mnuchin promised the proposal would bring back the U.S. back to a 3 percent, or higher, GDP growth rate.
The proposal could hit a major snag as it will likely need bi-partisan support in Congress. If the proposal is expected to increase the national-deficit beyond the 10-year window covered by the federal budget, it would require the approval of 60 Senators before it could pass. Republicans only have a slight majority in the Senate with 52 members.
Trump and Republican leadership would need to whip at least eight Senators behind the proposal if the situation presents itself.
“This is something I hope Democrats would support too, because it is good for the American people,” Cohn said Wednesday.
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