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President Donald Trump and the Republican tax reform group known as the “Big Six” debuted their latest outline for what the president has promised would be the “biggest tax cut in history.”
The outline revealed new goals, including a corporate tax rate of 20%, a pass-through rate at 25%, and the individual tax rates.
But it also omits some key details that will have to be fleshed out as the tax-writing committees work to craft actual legislation from the principles.
Given that the tax code is thousands of pages and the initial framework is only nine, some of the omitted details are most likely intentional to guard against initial blowback from interest groups.
Here are some of the biggest questions lingering as the committees prepare to begin crafting the legislation:
- What are the income levels associated with each individual tax bracket? We know the three marginal income tax rates will be 12%, 25%, and 35%. But we don’t know how much income you have to make to qualify for each bracket. What is the repatriation rate? The plan proposes that all overseas assets held by US companies will be considered repatriated. While the plan does say cash would be taxed at a higher rate than illiquid assets, it’s unclear what either of those rates would be. What itemized deductions would be eliminated? The plan says charitable giving and mortgage interest deductions would be preserved. As for the exact deductions taken away? Still unclear. What are the restrictions on pass-through companies? The new rate for pass-through income, or income of small-business owners, is proposed to be 25%. The plan promises to “adopt measures to prevent the recharacterization of personal income into business income,” which would prevent people from setting up shell corporations to lower their taxes. There are no details how that would happen. How much is the average American going to pay? Given the questions surrounding the tax brackets and deductions, it’s unclear exactly how much more someone making, for instance, $125,000, would pay than someone making $75,000. How much is this all going to cost? There are no estimates on potential impacts to the federal deficit.