WATCH: Trump to unveil plan for tax reform
WASHINGTON — President Donald Trump and congressional Republicans are proposing a far-reaching plan to cut taxes for individuals and corporations, simplify the tax system and nearly double the standard deduction used by most Americans.
"Too many in our country are shut out of the dynamism of the U.S. economy, which has led to the justifiable feeling that the system is rigged against hardworking Americans," says the blueprint, obtained by The Associated Press. "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 public unveiling of the plan was set for Wednesday.
The plan nearly doubles the standard deduction to $12,000 for individuals and $24,000 for families. This basically increases the amount of personal income that is tax-free.
It collapses the number of personal tax brackets from seven to at least three.
The rates would be 12 percent, 25 percent and 35 percent — and Congress would have the option of adding a fourth bracket for high-earners. But the plan does not set the income levels at which the rates would apply, so it's unclear just how much of a tax cut would go to a typical family.
The plan would seek to help families by calling for a higher tax credit and limiting the marriage penalty on the joint income of couples who both work.
Deductions for mortgage interest and charitable giving would remain, but the plan seeks to end most itemized deductions that can reduce how much affluent families pay.
The estate tax — which is levied on millionaires — would be eliminated, a likely boon for wealthy individuals who inherit businesses, investments and real estate.
Companies would find themselves paying substantially lower tax rates, part of an effort to make U.S. businesses more competitive globally.
Corporations would see their top tax rate cut from 35 percent to 20 percent. For a period of five years, companies could further reduce how much they pay by immediately expensing their investment in capital goods.
New benefits would be given to firms in which the profits double as the owners' personal income. They would pay at a 25 percent rate, down 39.6 percent. This creates a possible loophole for rich investors, lawyers, doctors and others, but administration officials say they will design measures to prevent any abuses.
The administration says say the tax plan is focused on helping middle class families. But — despite six months of talks with congressional leaders — the outline still lacks vital details about how middle class families would fare. There are also signs that the wealthiest sliver of Americans could still reap tremendous benefits from the proposed changes, even though President Donald Trump has suggested that rich will not be better off.