US President Donald Trump is calling for major tax cuts for business in a speech, as a longstanding Republican effort to overhaul the US tax code takes centre stage.
Top Republicans released a framework for the overhaul that includes lowering the tax rate for corporations from 35% to 20%, among other changes.
But many aspects remain unknown.
Republicans are looking for a policy win, after repeated failure to reform US healthcare.
They presented a united front on Wednesday, pledging to make changes while they control both the White House and Congress.
“We’re ready to build on this momentum and help get tax reform across the finish line,” Representative Kevin Brady of Texas said.
What cuts are in Republican tax plan?
- Reduce corporate rate from 35% to 20%
- Change tax on overseas profits
- A top 25% rate for firms organised as “pass-through entities”, such as limited liability corporations
- Nearly double the amount individuals and families can deduct to $12,000 and $24,000
- Increase tax credit for children
- Introduce a new tax credit for non-child dependents
- Eliminate a tax on inheritances
Democrats blasted the proposal, saying it would raise the burden on middle-class families, while offering a break for the wealthy.
They also said the cuts would increase the deficit, putting entitlement programmes such as Medicare and Social Security at risk.
The Committee for a Responsible Federal Budget, a nonpartisan think tank, said a rough analysis suggests the proposal would lead to $2.2tn in net cuts over about a decade.
The Trump administration maintains that closing loopholes will help offset revenue loss, but the plan does not specify what benefits will be eliminated.
Lawmakers plan to preserve tax incentives for homeownership, retirement, education, as well as research and development.
What will be eliminated?
White House officials said they intend to erase deductions for state and local taxes, among others.
They also said the lower rate for business will spur growth, helping to cover the cost.
Economists say growth will not be enough to close the gap. They expect the plan to add to the US debt, which has already passed $20tn.
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The Trump administration had earlier pledged to achieve tax reform before the end of August.
But it has been tough to reach agreement on even the broad goals released on Wednesday, many of which are familiar from earlier proposals.
The Chamber of Commerce, an influential business group that has pushed for reform, said it would remain engaged during the “hard decisions” ahead.
For example, lawmakers want to slim the number of tax brackets to three – with filers charged at a 12%, 25% or 35% rate – but what incomes would qualify for each rate remains to be seen.
Currently, the bottom rate is 10% and the top rate is close to 40%.
White House officials said the framework leaves Congress the flexibility to maintain a fourth, higher rate on the wealthiest households.
They also said the increased deduction will lower the overall tax burden, despite the higher rate for lower income families.
Democrat Chuck Schumer called that “bunk”.