Economist's Insights

Republican Tax Proposal Released

Sep 27, 2017

Republican leaders released a framework for overhauling the U.S. tax code, including simplified frameworks for both business and individual taxes.   The Committee for a Responsible Federal Budget said the proposal would result in approximately $5.8 trillion in tax cuts over the next ten years offset by $3.6 trillion in increased revenues.  The net tax cut would equal $2.2 trillion, or approximately $220 billion per year.  According to the WSJ, “Many Republicans expressed optimism Wednesday.  The conservative House Freedom Caucus endorsed the framework. But tax policy is notoriously thorny. Congress hasn’t overhauled the tax system in such an ambitious manner since 1986.”

Corporate Tax Code Proposal

1) 20 percent top corporate rate

2) 25 percent rate for pass-through businesses

3) immediate expensing of new capital investments in depreciable assets

4) one-time repatriation rate to draw foreign cash back to the U.S. then a territorial tax system

5) repeal or restriction of various deductions

Individual Tax Code Proposal

1) reduction from seven to four brackets: 12%, 25%, 35%, and a TBD rate set by Congress for the highest earners

2) increase in the standard deduction to $12,000 for single filers and $24,000 for married taxpayers filing jointly

3) increase in the child tax credit and introduction of a $500 credit for the care of non-child dependents

4) repeal of AMT and the death tax

5) elimination of most itemized deductions excluding mortgage interest and charitable donations

6) retain benefits for college savings and retirement accounts