Republican lawmakers unveiled a sweeping rewrite of the tax code on Thursday, outlining a $1.5 trillion plan that will deliver a significant tax cut for corporations and more modest savings for middle-class families while tilting the United States closer, but not entirely, toward the kind of tax system long championed by businesses.
The bill is heavily weighted toward business, which would receive about $1 trillion in net cuts, or two-thirds of the total, according to calculations by the Joint Committee on Taxation that were released Thursday by the Ways and Means Committee. At its center is a proposal to permanently cut the corporate tax rate to 20 percent from 35 percent — a change that is estimated to reduce federal revenues by $1.5 trillion over the next decade alone.
For individuals, the plan establishes three tax brackets — 12, 25 and 35 percent — instead of the seven that exist now and maintains a top rate of 39.6 percent for millionaires. The bill would also eliminate the alternative minimum tax, which is expected to hit 4.5 million families in 2017, and would roughly double the standard deduction for middle-class families. It would not, as many had feared, make any changes to the pretax treatment of 401(k) plans.
The benefits for individual taxpayers will be mixed and depend largely on where they fall on the income scale, where they live and the types of tax breaks they tend to claim.
Those making up to $24,000 will pay no income tax. For married taxpayers filing jointly, earnings up to $90,000 would be taxed in the 12 percent bracket; earnings up to $260,000 would fall in the 25 percent bracket; and earnings up to $1 million would be taxed at the 35 percent rate. For unmarried individuals and those filing separately, the bracket thresholds would be half of these amounts, other than the 35 percent bracket, which would be $200,000 for unmarried individuals.
The proposal roughly doubles the standard deduction for middle-class families, expanding it to $24,000 for married couples, from $12,700, and setting it at $12,000 for individuals, from $6,530 today. Republicans also plan to expand the child tax credit to $1,600 from $1,000 and add a $300 credit for each parent and nonchild dependent, such as older family members, though that credit would expire after five years.
The bill includes a host of other changes that will affect taxpayers in different ways. For instance, it repeals certain tax credits, including a 15 percent credit for individuals aged 65 or over or who are retired on disability. Right now, those individuals can claim up to $7,500 for a joint return, $5,000 for a single individual, or $3,750 for a married individual filing a joint return.
Reference: New York Times
Read more: https://www.nytimes.com/
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