President Donald Trump on Wednesday proposed the biggest U.S. tax overhaul in three decades, offering to cut taxes for most Americans but prompting criticism that the plan favours the rich and companies and could add trillions of dollars to the deficit.
The proposal, which the Republican president said was aimed at helping working people and creating jobs, faces an uphill battle in Congress with Trump`s own party divided and Democrats hostile.
Republicans plan to lower corporate income tax rates, cut taxes for small businesses, reduce the top income tax rate for individuals and scrap some widely used tax breaks including one that benefits people in high-tax states dominated by Democrats.
"It`s going to be something special," Trump told reporters at the White House, touting it as "the largest tax cut essentially in the history of our country."
The plan, forged during months of talks among Trump`s aides and top Republicans in Congress and embraced by big business, contained scant details about how to pay for the cuts without fuelling deficits.
Trump, a real estate mogul-turned-politician, said when asked by reporters that he personally would not stand to gain financially from the proposal.
"I think there`s very little benefit for people of wealth," said Trump, who has refused to make public his own tax returns unlike many of his White House predecessors.
Republicans have produced no major legislative successes since Trump took office in January even though they control the White House and both chambers of Congress.
The tax plan was outlined the day after the Republicans` top legislative priority, an overhaul of the U.S. healthcare system, collapsed in the Senate, while another key item on Trump`s wish list, infrastructure spending, has yet to materialize.
A comprehensive rewrite of the U.S. tax code has eluded lawmakers for decades. The last one was passed in 1986.
The White House said that under the proposal typical middle-class families would have less of their income subject to federal income tax.
The plan would lower the top individual rate from to 35 percent from 39.6 percent, but also roughly double the standard deduction, a set amount of income exempt from taxation, for all taxpayers.
The plan foresees a 20 percent corporate income tax rate, down from the current 35 percent but not as low as Trump`s initial demand for 15 percent.
Trump on Wednesday said that his 15 percent proposal was a bargaining position so he could get a 20 percent rate. "I`m not negotiating that number," Trump said. "Twenty (percent) is a perfect number."
Companies in the United States pay high taxes by global standards but many of them pay much less than the headline rate due to loopholes and tax breaks.
The proposal now faces a long legislative process that could take months. Trump has appealed to Democrats to support the plan, although they were not consulted in drafting it.
"Under this plan, the wealthiest Americans and wealthiest corporations make out like bandits while middle-class Americans are left holding the bag," said Chuck Schumer, the top Senate Democrat.
Republicans hold a thin 52-48 majority in the Senate and may need some Democrats on board to win passage. But Democrats said the plan would expand the federal deficit in order to deliver tax cuts to wealthy Americans rather than the middle-class families that Trump and Republicans say they are trying to help.
"If this framework is all about the middle class, then Trump Tower is middle-class housing," said Senator Ron Wyden, the top Democrat on the tax-writing Senate Finance Committee.
The proposal was a broad outline that will need to be turned into detailed legislation. Orrin Hatch, the Republican Senate Finance Committee chairman, said it will be nearly impossible to pass without some Democratic votes.
Kevin Brady, chairman of the tax-writing House of Representatives Ways and Means Committee, said his plan was to turn the framework into legislation to be passed by the end of this year.`NOW OR NEVER`
House Speaker Paul Ryan, a Republican, said there is an urgent need for Congress to approve the plan, adding, "This is a now-or-never moment."
Analysts have warned that huge tax cuts would balloon the federal deficit and debt if the economic growth projected by Republicans fails to materialize amid rising interest rates.
The White House and congressional Republicans did not give an estimate on the plan`s cost. The nonprofit Tax Foundation policy group previously estimated it would reduce federal revenue by up to $5.9 trillion in the next decade.
Republicans argue that the tax cuts would be offset by new revenues raised from eliminating tax loopholes and would drive more robust U.S. economic growth, predictions that critics question.
The proposal was embraced by the U.S. Chamber of Commerce business lobbying group and an organization called the RATE Coalition representing large American companies including AT&T Inc
The coalition, which said it represents firms employing over 30 million workers in all 50 states, said America`s corporate tax rate is the highest in the industrialized world and "out of step with global reality."
The tax framework would establish a 25-percent rate for business income from businesses called "pass-throughs." These usually small, private enterprises represent an estimated that 95 percent of all U.S. businesses.
Under current tax law, business profits are "passed through" to owners as personal income, which is often taxed at the top 39.6 percent individual income tax rate.
Republicans proposed eliminating some existing tax deductions, though they retain deductions for mortgage interest payments and charitable deductions. They proposed scrapping the deduction for the amount a taxpayer pays in state and local taxes, which could hurt people in high-tax states including California and New York that tend to vote Democratic.
The proposal aims to consolidate the current seven tax brackets into three brackets of 12 percent, 25 percent and 35 percent.
(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)