27 September 2017•Update: 28 September 2017
By Ovunc Kutlu
NEW YORK
The administration of President Donald Trump and Republican leaders introduced Wednesday a new tax reform framework that would overhaul the country’s three-decade-old tax system, according to the House Speaker's office.
The much-anticipated tax reform plan that was a cornerstone of Trump's presidential campaign, aims to lower the corporate tax rate to 20 percent, from 35 percent, give companies higher earnings and increase investments.
The proposed 20 percent corporate tax rate is "below the average of other industrialized nations," Trump said at a speech in Indiana. "This is a revolutionary change, and the biggest winners will be middle class workers as jobs start pouring into our country, as companies start competing for American labor and as wages continue to grow.”
Trump said the first $12,000 earned by an individual will be tax free, while the same will apply for a married couple for up to $24,000.
The president said the goal of the framework is for a simpler and fairer tax code for U.S. taxpayers.
It simplifies the tax code by lowering the number of individual tax brackets from seven to three -- 12 percent, 25 percent and 35 percent -- down from the current maximum of 39.6 percent.
While the plan looks to eliminate loopholes for wealthy taxpayers, there is also room for an additional top rate for the highest-income earners that will be decided later by Congress.
"This is our best opportunity in a generation to deliver real middle-class tax relief, create jobs here at home, and fuel unprecedented economic growth. It has been 31 years since we last got this done," House Speaker Paul Ryan said in a statement.
The plan also seeks to help businesses write off the cost of new investments for at least five years, and would impose a one-time low tax rate on American companies overseas to bring back wealth to the economy.
Critics have argued that lowering tax rates would mean less revenue for the federal government and may lead to an increase of the budget deficit.
Commerce Secretary Wilbur Ross, however, said Tuesday that would not be the case.
"The tax reform would increase the gross domestic product growth by 1 percentage point," which in 10 years "would amount to $10 trillion more GDP, $3 trillion more in revenue to the federal government," he said.
