House Republicans introduced a $1.5 trillion tax cut proposal on Thursday that would drastically reduce current obligations for some of the wealthiest individuals and firms in the country.
The so-called Tax Cuts and Jobs Act, which has received an endorsement from President Trump, includes tax reductions for most Americans. But benefits fall heaviest on entities at the higher end of the wealth spectrum.
Pre-deduction corporate tax rates would be permanently slashed from 35 percent to 20 percent. Other types of businesses, like partnerships and S-corps, would see their rates reduced to 25 percent. The plan does attempt to apply taxation to the trillions of dollars in profits that US multinational corporations are holding overseas. It would subject those stashes to a 12 percent tax—still well below the current 35 percent rate the company would have to pay under current law if it attempted to repatriate the profits.
Sen. Elizabeth Warren (D-Mass.) estimated that corporations stand to gain $2 trillion in tax benefits.
The number of individual tax brackets under the plan would be reduced to just four: 12 percent, 25 percent, 35 percent, and 39.6 percent. All households making less than $1 million per year would see a reduction in rates under the new configuration.
On the lower end of the income scale, the plan offers a sprinkling of benefits. Married households making up to $24,000 annually would be subject to no income tax. The child tax care credit would be increased from $1,000 to $1,600.
Although the nation’s highest income earners won’t see a reduction in their individual rates, they will receive a gift in the form of a repeal of the alternative minimum tax and estate tax breaks. The proposal doubles the current estate tax exemption to $11 million, before completely eliminating in six years.
In 2013, the estate tax affected only the wealthiest 0.2 percent of Americans.
To afford the deep cuts in nominal rates, the GOP blueprint reduces a number of tax breaks, which could lure opposition against the bill.
Mortgage interest deduction would be cut in half to $500,000 under the plan. The National Association of Realtors and the National Association of Homebuilders both came out against the policy change.
The plan also repeals the state and local tax deduction, which could provoke intra-party fighting between Republicans from low and high-taxed states. Even in this case, however, the legislation would give a nod to wealthy interests by replace the deduction with a state and local property tax write-off worth up to $10,000.
Also eliminated under the plan are deductions for moving expenses, medical care, and tax preparation costs, and a 15 percent tax credit for retired seniors on disability.
Despite the overwhelming breaks flowing to the wealthy, Speaker of the House Paul Ryan (R-Wisc.) claimed “the whole purpose of this is a middle class tax cut to give people more take home pay.”
Ryan went on to allege that the typical family of four would receive a $1,182 annual tax break.
But Democrats cast the GOP plan as wealth redistribution to top income earners and other natural Republican constituents.
Sen. Chris Murphy (D-Conn.), tweeted, “At least GOP is unapologetic about the two goals of tax bill: (1) shift money from poor to rich; (2) shift money from D states to R states.”
During a press briefing with reporters on Tuesday, House Minority Leader Nancy Pelosi (D-Calif.) also referred to a “catastrophic transfer” of wealth to the rich.
President Trump told reporters from the Oval Office that there is still work left to do on the bill, but that he hopes to sign it by year’s end. He claimed it would be “one of the great Christmas presents.”