Trump and the “Big Six” group of Republican tax negotiators on Wednesday rolled out the most detailed look yet at the plan. It is the opening salvo of what is likely to be a long process to attempt to overhaul the tax code.
“Too many in our country are shut out of the dynamism of the US economy, which has led to the justifiable feeling that the system is rigged against hardworking Americans,” the nine-page plan reads. “With significant and meaningful tax reform and relief, we will create a fairer system that levels the playing field and extends economic opportunities to American workers, small businesses, and middle-income families.”
The Big Six has been meeting over the past few months to hash out the details of the tax plan. The group is Gary Cohn, the National Economic Council director; Steven Mnuchin, the Treasury secretary; Mitch McConnell, the Senate majority leader; Sen. Orrin Hatch, the Senate Finance Committee chairman; Paul Ryan, the House speaker; and Rep. Kevin Brady, the House Ways and Means Committee chairman.
Personal tax changes:
- A bottom individual tax rate of 12%: The plan is designed to have three tax brackets (for now), with the lowest tax rate being 12%. That would represent a slight bump in the bottom bracket, as it now sits at 10%. People currently in the 15% marginal tax bracket would likely be included here.
- A middle tax bracket of 25%: It’s not specified what incomes would fall into this bracket.
- The top individual tax rate of 35%: That would be down from the current top rate of 39.6%.
- The possibility of a fourth, higher bracket: Due to Trump’s insistence that the taxes for the wealthiest Americans not increase, the plan proposes the possibility of a fourth tax bracket at a rate higher than 35% if the tax-writing committees wish. “An additional top rate may apply to the highest-income taxpayers to ensure that the reformed tax code is at least as progressive as the existing tax code and does not shift the tax burden from high-income to lower- and middle-income taxpayers,” the plan reads.
- A larger standard deduction: To avoid raising taxes on those currently in the 10% tax bracket, the standard deduction for all taxes would be doubled to $12,000 for individuals — up from $6,350 — and $24,000 for married couples — up from $12,700. These are slightly less than the doubled deduction expected. (And as noted Business Insider’s Josh Barro, the idea that this will save people money may be misleading.)
- Eliminates most itemized deductions: While not specifically named, the only deduction preserved in the plan explicitly are for charitable gifts and home mortgage interest.
- Increases the size of the child tax credit: A pet project of Ivanka Trump, the plan proposes to make the first $1,000 of the child tax credit refundable and would increase the income level at which the credit would phase out.
- Vague promises on retirement savings and other deductions: There are sections of the plan referring to retirement savings and other “provisions,” but details were sparse.
- Elimination of the state and local tax deduction: The SALT deduction allows people to deduct what they pay in state and local taxes from their federal tax bill. This deduction is mostly taken by wealthier Americans in Democratic states. Around one-third of the benefits from people using the SALT deduction comes from New York, New Jersey, and California.
- Elimination of the estate tax: Called the “death tax” in the plan, this tax only applied to inherited assets totaling $5.49 million or more in 2017. Very few households pay the estate tax, but it has been a long-time target for Republicans.