The Trump administration has unveiled what it called the biggest tax cut in U.S. history, proposing a sharp reduction in corporate taxes and a simplification of individual rates it says would trigger economic growth.
Edith Atele reports that U.S. Treasury Secretary, Steven Mnuchin, says the proposed tax cut would slash corporate taxes from 35 percent to 15 percent and include a “one-time” cut-rate tax to induce companies to repatriate trillions of dollars of profits held overseas.
Middle class tax relief and simplification Act was top on the list of Donald Trump’s 100-day plan, which he unveiled in Pennsylvania, during his campaign trail.
For individuals, the proposal included simplifications, a cut in the top tax rate from 39 percent to 35 percent, and a reduction in the number of tax brackets from seven to three- (10%, 25% and 35%)
The White House said US companies were labouring under a tax system that had not been updated since the 1980s. But Democrats are yet to declare their support for the tax cut, fueling speculations that the plan would have to be temporary, not more than 10 years.
The announcement comes amid a continuing row over Trump’s own taxes, with members of his own party asking for him to release his returns before pressing ahead with tax reforms.
Critics of the Trump administration, have slammed the proposed tax cuts, calling it “a plan for the rich”, and a “reckless” plan “for massive tax giveaways to corporations.
The new proposal will cut the Alternative Minimum Tax (AMT), a tax designed to stop the wealthy from taking so many tax deductions. Leaked documents have shown that in 2005 Trump paid $31m in tax thanks to the AMT.
The proposed tax cut will also get rid of almost all tax deductions, including those for state and local taxes, and this will create a significant increase in taxes for residents of high tax states such as California and New York.
The plan faces significant obstacles because of the need for Democratic support, and “reconciliation” rules that place strict limits on any tax cuts that result in increases to the deficit.
The U.S. already has a deficit of about $19 trillion, and a 20-percentage-point cut to corporate tax rates alone would add about $2.4 trillion to the nation’s debt.