The White House unveiled an ambitious tax overhaul plan Wednesday, proposing deep cuts for individuals and businesses in what it called one of the biggest tax reforms in US history.
President Donald Trump's initiative -- outlined in a one-page summary -- lowers the top corporate tax rate "from one of the highest in the world to one of the lowest," from 35 percent to 15 percent, while simplifying individual tax rules, the White House said.
The reform would lower the individual tax burden across the board, affecting millions of Americans, but also eliminate "targeted tax breaks that mainly benefit the wealthiest taxpayers."
The proposal represents a starting point with goalposts for lawmakers to debate before Congress makes any changes to the US tax code.
White House economic advisor Gary Cohn said the business tax reform was long overdue because the US currently is "one of the least competitive countries in the developed world when it comes to corporate tax."
"We are going to cut taxes for businesses to make them competitive and we're going to cut taxes for the American people especially low- and middle-income families," said Cohn, who heads the new National Economic Council.
- Deficit concerns -
The plan would also shift to a territorial system, meaning overseas profits would be exempt from US taxes. US corporate income is currently taxed regardless of where it is earned, prompting many firms to keep part their foreign earnings offshore.
Speaking to reporters at the White House, Treasury Secretary Steven Mnuchin said a one-time tax on overseas profits would "bring back trillions of dollars that are offshore to be invested here in the United States to purchase capital and to create jobs."
The officials did not provide details on how the tax cuts would be paid for at a time when Congress is riven by concerns over US debt and deficit spending.
Analysts say cutting the top corporate rate to 15 percent could add more than $2 trillion to the deficit over a decade.
They also dispute White House expectations that the tax cuts will boost economic growth and bring in enough revenues to offset the cost. That assumption is unrealistic, they say.
- Simplified declarations -
For individuals, the reform promises to simplify tax declaration by, among other things, reducing the number of income tax brackets from seven to three, at 10 percent, 25 percent and 35 percent.
The standard tax-free deduction would be doubled, a change Cohn said would amount to "a zero tax rate" on a married couple's first $24,000 in annual income.
The proposal also calls for eliminating a 3.8 percent tax on investment income used to help meet costs under for President Barack Obama's health care program, and the Alternative Minimum Tax, paid by people and companies who enjoy large deductions on standard income tax.