By Sahil Kapur and Shannon Pettypiece
April 26, 2017
The White House made its opening bid for what officials called the “biggest tax cut” in U.S. history -- with cuts that would benefit businesses, the middle class and certain high-earning individuals -- but left unanswered questions about whether the plan would be paid for, or how. A list of goals for the tax overhaul calls for slashing the federal income-tax rate to 15 percent for corporations, small businesses and partnerships of all sizes. It also imposes a one-time tax on about $2.6 trillion in earnings that U.S. companies have parked overseas. The plan would end the taxation of corporations’ offshore income by moving to a territorial system, in which most foreign profits would be exempt from U.S. taxes. On the individual side, it proposes condensing the existing seven income-tax rates to just three, cutting the individual top rate to 35 percent from 39.6 percent. It would also end a 3.8 percent net investment income tax that applies only to individuals who earn more than $200,000 a year, repeal the alternative minimum tax and eliminate the estate tax.
At the same time, the plan would eliminate the federal income-tax deduction allowed for state and local taxes -- a provision that would hit high earners in high-tax states, including New York and New Jersey. The only itemized deductions that would be preserved under the plan would be for home mortgage interest and charitable contributions. It wasn’t immediately clear Wednesday whether the plan would pay for itself; Mnuchin and others have said it would stimulate enough economic growth to cover the cost of the tax cuts. Economists have called that proposition into question -- raising questions about whether any tax cuts it proposes would have to be temporary under congressional rules. The White House proposal didn’t specify whether a tax plan should be revenue-neutral -- if it isn’t, the cuts would expire within a decade. It didn’t take a position on revenue-raisers that House Republican leaders have proposed, including a border-adjusted tax on imports and domestic sales.
