President Trump is set to announce his plans for tax reform today. While it's been widely reported that he will cut the corporate tax rate from 35 percent to 15 percent, that's far from the only change on the agenda. Here are eight key things to know about the plan.
Cuts for businesses of all sizes
Trump's proposed tax plan would include the previously mentioned corporate tax cut. That would apply to businesses of all sizes that pay through the personal income tax code, including his own company, The New York Times reported.
The 15 percent rate would also apply to businesses like hedge funds and major partnerships, classified as "pass through" firms or "S corporations."
The plan will also call for a sizable increase in the standard deduction people can claim on tax returns. The current total is $6,300 for individuals and $12,600 for married couples. On the campaign, Trump proposed increasing that to $15,000 for individuals and $30,000 for families, but the exact numbers haven't been nailed down yet, The Washington Post reports.
That means people would pay taxes on a smaller percentage of their income, keeping more money.
So is it revenue neutral?
What makes this plan politically divisive is that Trump's plan doesn't include new taxes that would pay for these cuts. The administration has insisted that the economic growth resulting from these tax cuts would overcome the deficit.
The Times reports Trump's plan doesn't include a Republican-proposed border tax that would have offset much of the cost of the tax cuts.
What won't come on Wednesday
Many of Trump's economy-related talking points won't be mentioned in Wednesday's plan, including:
- The previously mentioned border adjustment tax
- An expanded child-care tax credit
- The long-discussed $1 trillion infrastructure plan
The conservative response
Stephen Moore, economist at the conservative Heritage Foundation, said "Conservatives are going to be very happy with this plan," particularly the corporate tax cuts. But he also questioned "whether there is some sort of pay-for for any of this."
In Congress, Sen. Orrin Hatch (R-UT) said he was "open to good ideas" but questioned if the "pass through" corporations should also get the tax cut. Rep. Kevin Brady (R-TX) hailed the "very ambitious plan."
It is [workable], if you want to blow a hole in the federal budget and cut a whole lot of things like Meals on Wheels and Lake Erie restoration...
The liberal response
The proposed tax cuts have angered Democrats like Sen. Sherrod Brown. Frank Clemente, executive director of Americans for Tax Fairness, accused Trump of trying to "dramatically reduce his own tax bill."
Many politicians in Washington want to see the president fail. The more he promises and raises expectations, the more likely it is that he will.
How the stock market will react
Wall Street is divided on Trump's plan. While the corporate tax cuts are tantalizing, JonesTrading strategist Michael O'Rourke said any plan would be an "unrealistic, massive disappointment."
The U.S. recorded its slowest economic growth in five years (2016). GDP up only 1.6%. Trade deficits hurt the economy very badly.— Donald J. Trump (@realDonaldTrump) April 26, 2017
Trump seemed to set the stage for his tax reform with a dismal economic recap on Twitter.
BREAKING: Treasury Secretary Mnuchin says Trump to propose `biggest tax cut' and `largest tax reform in US history'— The Associated Press (@AP) April 26, 2017
Mnuchin promised the tax cut would be the biggest in U.S. history.