Trump vows big tax cut for US middle class
U.S. President Donald Trump on Tuesday said a forthcoming tax reform plan would cut taxes “tremendously” for the middle class, as Republican conservatives said they could accept big revenue losses in exchange for aggressive tax cuts for businesses.
As the administration and Republicans in Congress prepared to unveil a tax blueprint on Wednesday, Trump told a bipartisan group of lawmakers from the House of Representatives to expect a “very comprehensive” and “very, very powerful document.”
“We will cut taxes tremendously for the middle class – not just a little bit, but tremendously,” the president said.
With the latest Republican push to overturn Obamacare sputtering in the Senate, Republicans are under mounting pressure to overhaul the U.S. tax code before year-end.
But up to now, the drive for tax reform has been repeatedly delayed and Wednesday’s plan was likely to be light on specifics.
Details of the plan that leaked out over the weekend showed that the corporate income tax rate would be slashed from 35 percent to 20 percent, the rate for “pass-through” businesses from 39.6 percent to 25 percent and the rate for top individual earners from 39.6 percent to 35 percent.
Without offsets such as the closing of lucrative tax loopholes to pay for lower tax rates, the tax cuts would lose about $5 trillion in revenue over a decade, according to the nonpartisan Tax Foundation think tank.
Even fiscal hawks are showing a willingness to accept huge revenue losses, predicting aggressive tax cuts would drive economic growth high enough in future years to produce a flood of new tax revenues that would pay for lower rates.
Senate Republicans last week tentatively agreed that tax legislation could lose up to $1.5 trillion over a decade but become revenue neutral thereafter.
On Tuesday the chairman of the conservative House of Representatives Freedom Caucus said he would not support a tax reform plan with a corporate tax rate above 20 percent or a small business rate above 25 percent.
Another Freedom Caucus member registered support for revenue losses greater than those agreed in the Senate.
“A lot of people are willing to go to $2 trillion. Getting the growth over 10 years will pay that back in no time, for real,” Representative Dave Brat of Virginia told reporters.
The Republican tax-cut plan is expected to call for a new rate for “pass-through” businesses of about 25 percent, which would bring huge tax savings to millions of U.S. business owners, a lobbyist familiar with the negotiations said.
About 95 percent of American businesses are pass-throughs such as sole proprietorships, partnerships and S-corporations, according to the Brookings Institution, a Washington think tank. The name comes from the profits and losses of such businesses that pass directly to their owners, unlike public corporations.
Pass-through profits are now taxed at top individual income-
tax rates as high as 39.6 percent, higher than the top corporate income tax rate of 35 percent – a disparity that pass-through business owners have long complained about.
President Donald Trump is slated to travel to Indiana on Wednesday and unveil a tax “framework” that has been in the works for more than eight months and is part of his 2016 campaign promise of tax reform.
“These details will include specific proposed rates for individuals, small businesses, and corporations, and he will also discuss the elimination of loopholes that have rigged the current tax code in favor of the wealthy and well-connected,” White House spokeswoman Sarah Sanders told a Monday press briefing.
(Additional reporting by Richard Cowan; editing by Peter Cooney and Andrew Hay)