It is no secret that Congressional Republicans plan to radically overhaul the United States tax system. This will affect every American at every income level and businesses of every size. The aim of the GOP is to simplify the existing complicated tax code. According to them, the present tax code rewards rich people who employ smart accountants and the corporations adept at shifting profits along with jobs overseas.
Republican heavyweights like Mitch McConnell and Paul Ryan, the Senate Majority Leader and Speaker respectively, have pledged to pass a 2017 tax package which will not weigh on the already huge budget deficit. Washington has also given it a term: revenue neutral. The term implies that every slash in tax must be compensated with tax increase. This will result in tax losers and winners. Lawmakers will get respite of the nonpartisan congressional analysts give the projection that a cut in tax will result in the growth of the economy. If this happens, revenue can be increased without the imposition of taxes.
Republicans in the House have published a tax plan outline which will reduce top rate of individual income taxes from the present 39.6 percent to 33 percent. The tax bracket numbers will also be reduced to three from the existing seven. The summary of the plan is to reduce rates of tax for everybody, and to compensate lost revenues by cutting deductions, credits and exemptions. Popular tax breaks, however, are retained in the plan. Respite from taxes will be available for mortgage payments, college fees and charitable contributions. The plan includes the standard deduction to be increased, this providing the taxpayers much less incentive when it comes to itemize the deductions. Owners of small businesses will get a special 25 percent top tax rate.
Income tax and corporate tax
The plan envisaged by Donald Trump, the President-Elect, has fewer details. The businessman turned politician has pledged a tax cut at every income level. Families having low income will enjoy zero income tax. According to Tax Policy Center, the plan made by President-Elect will lead to about $9.5 trillion less revenue during the first 10 years. Benefits of such a plan will be cornered by the cream of the economy pie. Not surprisingly, this analysis has been disputed by Trump.
Top rate of corporate income tax is 35 percent at present. It is highest among all developed countries. The tax is battered with multiple exemptions, credits and deductions so that most companies pay noticeably less. Both Trump and Republicans want the tax rate to be lowered.