President Trump promised drastic tax cuts Wednesday as he touted Republicans' newly unveiled tax reform plan, arguing the push to re-write the tax code would fuel “America’s economic comeback.”
“These tax cuts are significant,” the president said during a speech at the Farm Bureau Building in Indianapolis. “There’s never been tax cuts like we’re talking about.”
Republicans on Wednesday released the framework of their plan that was hammered out by House and Senate lawmakers in coordination with the Trump administration.
The plan would simplify the tax system, cut rates and nearly double the standard deduction used by most Americans.
“Over the next few months, the House and Senate will build on this framework and produce legislation that will deliver more jobs, higher pay and lower taxes for middle class families, for the working man and woman, and for businesses of all sizes,” the president said.
The stakes are high, after Republicans a day earlier scrapped their latest effort to repeal and replace ObamaCare.
During his speech, the president discussed the health care effort, claiming Republicans have the votes on the Graham-Cassidy health care legislation. But, in an apparent reference to Mississippi Republican Sen. Thad Cochran, Trump said one “yes vote” is home sick and unavailable to vote.
“We have a wonderful senator, a great, great senator, who is a yes vote,” Trump said. “But he’s home recovering from a pretty tough situation.”
Citing the Senate process called “budget reconciliation,” which gives Republicans until Friday to pass the health care legislation, the president said they will wait a few months before being able to vote on it.
Now, the legislative focus shifts to tax reform, which Trump has been eager to tackle since taking office.
“The current tax system is a colossal barrier standing in the way of America’s economic comeback, because it can be far greater than it’s ever been,” Trump said.
The plan, as outlined in the framework, 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.
Congressional Republicans describe this as creating a larger “zero tax bracket.”
The plan also collapses the number of personal tax brackets from seven to three. By simplifying the system, most Americans would be able to file their taxes on a postcard, the plan says.
Deductions for mortgage interest and charitable giving would remain, but the plan seeks to end most other itemized deductions that can reduce how much affluent families pay.
But a battle is already brewing among Republicans over a move to eliminate the deduction for state and local taxes, which is especially valuable to people in high-tax states such as New York, New Jersey and California. The plan retains existing tax benefits for college and retirement savings such as 401(k) contribution plans.
The individual tax rates would be 12 percent, 25 percent and 35 percent -- and the plan recommends a surcharge for the very wealthy. But it does not set the income levels at which the rates would apply, so it's unclear just how much of a tax change there might be for a typical family.
The plan would seek to help families by calling for an increased child tax credit and opening it to families with higher incomes. The credit currently is $1,000 per child. Also proposed is a new tax credit of $500 to help pay for the care of the elderly and the sick who are claimed as dependents by the taxpayer.
The estate tax -- which is paid by those with multimillion-inheritances -- would be eliminated, a boon for wealthy individuals who inherit businesses, investments and real estate.
Corporations, meanwhile, would see their top tax rate cut from 35 percent to 20 percent.
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 from 39.6 percent.
The Associated Press contributed to this report.