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Trump outlines major tax cut plans Trump outlines major tax cut plans
(about 2 hours later)
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. US President Donald Trump has called for major tax cuts as part of a longstanding Republican effort to overhaul the US tax system.
Top Republicans released a framework for the overhaul that includes lowering the tax rate for corporations from 35% to 20%, among other changes. A framework released by Republicans calls for lowering the tax rate for corporations from 35% to 20%, among other changes.
But many aspects remain unknown. The president said the revamp will make the US more competitive and help middle class families.
Republicans are looking for a policy win, after repeated failure to reform US healthcare. Democrats criticised the plan as a give-away for the wealthy.
They presented a united front on Wednesday, pledging to make changes while they control both the White House and Congress. The Republican blueprint does not detail what tax benefits might be eliminated to offset the cost of the cuts - negotiations that are likely to be difficult.
"We're ready to build on this momentum and help get tax reform across the finish line," Representative Kevin Brady of Texas said. The Chamber of Commerce, an influential business group that has pushed for reform, said it would remain engaged during the "hard decisions" ahead.
What cuts are in Republican tax plan? What cuts are in the Republican tax plan?
For businesses:For businesses:
For families:For families:
'Hard decisions' 'A relic'
Democrats blasted the proposal, saying it would raise the burden on middle-class families, while offering a break for the wealthy. President Trump said he wanted to simplify the system, lower the burden on middle class families and make the US more competitive.
They also said the cuts would increase the deficit, putting entitlement programmes such as Medicare and Social Security at risk. "Our country and our economy cannot take off like they should unless we dramatically reform America's outdated, complex and extremely burdensome tax code," he said.
Among the changes, Republicans would slim the number of tax brackets to three - with people charged at a 12%, 25% or 35% rate.
What incomes would qualify for each rate is still unknown.
Currently, the bottom rate is 10% and the top rate is close to 40%.
Democrats said the changes will hurt middle class families, particularly lower income, single parents with children.
"He's talking the talk but he's not walking the walk," said Senator Chuck Schumer of New York, a top Democrat.
Mr Schumer also said the cuts would increase the deficit, putting entitlement programmes such as Medicare and Social Security at risk.
Deficit-financed cut
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 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.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.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.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.
Trump dines with Democrats to talk taxTrump dines with Democrats to talk tax
Trump: 'It's time' for tax reform - TrumpTrump: 'It's time' for tax reform - Trump
US tax reform: Tough task for TrumpUS tax reform: Tough task for Trump
President Trump said the lower tax rate for business will spur growth, helping to cover the cost.
But economists maintain that growth will not be enough to close the gap. They expect the plan to add to the US debt, which has already passed $20tn.
"It is clear that much more work needs to be done to ensure tax reform is fiscally responsible," the Committee for a Responsible Federal Budget said. "Given today's record-high levels of national debt, the country cannot afford a deficit-financed tax cut."
Building momentum
Republicans are looking for a policy win, after failing to reform US healthcare.
The Trump administration had earlier pledged to achieve tax reform before the end of August.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.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. Republican leaders presented a united front on Wednesday, pledging to make changes this year while they control both the White House and Congress.
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".