What you need to know about the GOP tax plan
The Trump administration and congressional Republicans are releasing the framework of a tax plan that substantially lowers most individual and corporate tax rates. While it includes some key policies — like the elimination of the deduction for state and local taxes — it leaves many crucial details to congressional committees to fill in.
What's next: Now that this plan is on paper, the blowback is going to be intense. Everyone has a stake in the tax reform fight, and everyone is going to be very loud about what they want.
Here are more details about the plan, per senior administration officials.
Individual tax reform:
- Creates three tax brackets — 12 percent, 25 percent and 35 percent — and gives the option for congressional committees to add a fourth rate on the highest earners. Doesn't define the income ranges to which these rates apply.
- Currently, there are seven individual rate brackets ranging from 10 percent to 39.6 percent.
- Almost doubles the standard deduction to $12,000 for a single person and $24,000 for a married couple.
- Increases the child tax credit to something "substantially higher" than the current $1,000 per child. Increases the income level at which the credit phases out.
- Creates a $500 tax credit for non-child dependents.
- Repeals the alternative minimum tax.
- Repeals the personal exemption.
- Eliminates most itemized deductions, but keeps those for mortgage interest and charitable contributions.
- Repeals the estate tax.
- Eliminates state and local tax deduction.
Corporate tax reform:
- Maximum small business rate of 25 percent. Right now, it's generally taxed at the individual level.
- 20 percent corporate rate. Currently, it's 35 percent.
- Repeals the corporate alternative minimum tax.
- Allows businesses to immediately write off the cost of new investments over five years.
- Partially limits interest deductibility.
- Keeps the research and development tax credit, along with the low income housing credit.
International tax reform:
- Moves to a "territorial system," which doesn't tax business profits made outside the country.
- As a transition, there will be a one-time tax on profits accumulated overseas. Higher rate for cash profits than liquid assets, but doesn't say what the rates are.