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Trump's tax plan to propose deep US rate cuts, lacks revenue details

Republicans also expect to predict that the tax-cuts if approved by Congress, would drive more robust economic growth, predicitons that critics are sure to question

Reuters  |  Washington 

President Donald Trump. Photo: PTI
President Donald Trump. Photo: PTI

US President will call on Wednesday for slashing rates on businesses and the wealthy as part of a new plan that is likely to offer few details about how to pay for the cuts without expanding the federal deficit.

Hammered out over months of talks among Trump aides and top in Congress, the plan to be unveiled at an event in Indianapolis was expected to propose a 20 per cent corporate income rate, a new 25 per cent rate for pass-through businesses such as partnerships, and a reduced 35 per cent top income rate for individual Americans.

While it would lower the top individual rate from 39.6 per cent, the plan was also expected to double the standard deduction, a set amount of income exempt from taxation, for all taxpayers.

"You have to look at the plan in its entirety. It doubles the standard deduction, so in the end, even the lowest rates get a cut," said Jim Renacci, a Republican on the tax-writing House of Representatives Ways and Means Committee.

will say that the cuts, widely leaked to the media by a variety of sources in recent days, would be offset by new revenues raised from eliminating loopholes, although few if any of those are expected to be named in the plan.

are also expected to predict that the Trump cuts if approved by Congress, would drive more robust US economic growth, predictions that critics are sure to question.

At a time of slow but steady US economic expansion, the Trump tax-cut package has some support in Congress, even among Republican fiscal hawks who only a short time ago routinely opposed deficit-financed fiscal proposals.

Trump and his Republican allies made completing reform in 2017 a top promise of the 2016 election campaign and are under mounting pressure to finish the job since the collapse of the latest Republican effort to overturn the Obamacare healthcare law.

Trump was expected to push lawmakers hard to quickly approve his package, despite critics who will say it falls short of the "reform" he promised on the campaign trail.

The plan will be the latest in a series of Republican documents outlining policy goals, but failing to tackle the tough questions that have defied past administrations' efforts to fix the code. It has not been reformed since 1986.

Warnings on deficit

The Republican president was expected to try to sell his proposals as beneficial to US workers by saying they would drive economic growth, create jobs and raise wages.

Corporations now pay a statutory 35 per cent income rate. That is high by global standards and corporations have been seeking a cut for years, even though many of them pay much less than the headline rate due to loopholes and breaks.

Profits of small, pass-through businesses that are passed directly to the owners are now taxed at the individual income rates, often at the top level of 39.6 per cent.

Analysts have warned that huge cuts would balloon the federal deficit and debt if the projected by fails to materialise amid rising

An early analysis of the Trump plan by the nonpartisan Foundation think tank estimated it would reduce federal revenues by roughly $5 trillion over a decade, excluding offsets.

On Tuesday, Trump told and Democrats from the tax-writing House Ways and Means Committee that he wanted reform to be bipartisan.

The plan to be unveiled was developed by a small team of senior behind closed doors with no input from Democrats. It was not clear how far in would go to accommodate Democratic demands for neutrality and no cuts for the wealthy.

"Trump asked for Democrats to jump on the caboose after the train has already left the station. I saw no Democrat ready to jump on board," Democratic Representative Lloyd Doggett said after the meeting.

First Published: Wed, September 27 2017. 19:11 IST