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Trump hails tax plan as ‘revolutionary change’ for middle class

INDIANAPOLIS — President Trump on Wednesday began a full-throttle push to slash taxes and salvage what is left of his foundering legislative agenda in Congress, proposing a politically challenging array of tax cuts for individuals and businesses that would constitute the most sweeping changes to the federal tax code in decades.

Trump, smarting from the latest defeat this week of his efforts to dismantle the Affordable Care Act, cast his tax plan as an economic imperative and the fulfillment of a promise to his coalition of working-class supporters to deliver benefits in the form of lower taxes, better jobs, and higher wages. But the president offered few details about how working people might benefit from a plan that has explicit and substantial rewards for wealthy people and corporations, including the elimination of taxes on large inheritances and deep reductions in the rates paid by businesses large and small.

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“This is a revolutionary change, and the biggest winners will be middle-class workers as jobs start pouring into our country, as companies start competing for American labor, and as wages continue to grow,” Trump told hundreds of supporters in a nondescript building at the Indiana State Fair Grounds. “This will be the lowest top marginal income tax rate for small and midsize businesses in more than 80 years.”

Whatever the economic effects, the political stakes of the plan were unmistakable for a president who is desperate to score a legislative win before his first year in office draws to a close. In an apparent nod to the harsh political realities the tax plan faces and festering divisions among Republicans that have derailed the rest of his agenda, Trump made an explicit bid to Democrats to support the plan. However, Republican congressional leaders and senior White House officials have said privately they expect to use special budget rules that would allow them to get the bill through Congress without Democratic support.

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Senior administration officials who briefed reporters on the proposal said the White House was fully aligned with the tax-writing committees in the House and Senate, after months of private talks aimed at gaining consensus on the issue.

While the Republican leadership claims to be unified on the tax plan, they must now sell it to lawmakers who have proved to be deeply divided this year.

Democrats and progressive groups, meanwhile, swiftly denounced the tax plan as a false promise to the middle class.

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“If this framework is all about the middle class, then Trump Tower is middle-class housing,” said Senator Ron Wyden, Democrat of Oregon. “It violates Trump’s tax pledge that the rich would not gain at all under his plan by offering sweetheart deals for powerful CEOs, giveaways for campaign coffers, and a new way to cheat taxes for Mar-a-Lago’s loyal members.”

After months of secret talks, the proposal produced by the so-called Big Six working group provides as many questions as it does answers. Without those details, it is difficult to say whether middle-income families will see the most benefit from the tax overhaul or if it will favor the richest Americans.

On the individual side, the plan would collapse the tax brackets from seven to three, with tax rates of 12 percent, 25 percent and 35 percent, administration officials said. The current top rate is 39.6 percent and the lowest rate is 10 percent.

The framework also gives Congress the option of creating a rate above 35 percent to ensure that the rich are paying their fair share. But it does not specify what income levels would be associated with the higher rate or what that new rate might be.

The plan aims to simplify and cut taxes for the middle class by doubling the standard deduction to $12,000 for individuals and to $24,000 for married couples. That would allow people to avoid a complicated process of itemizing their taxes to claim various credits and deductions. It would also increase the child tax credit from $1,000 to an unspecified amount and create a new $500 tax credit for dependents, such as the elderly, who are not children.

Provisions such as the alternative minimum tax and the estate tax, a tax on inherited wealth which Trump has derided over the years, would be gone under the Republican proposal. Most itemized deductions, including those widely used for state and local tax expenses, would also be eliminated. However, the plan would preserve the deductions for mortgage interest expenses and charitable giving and keep incentives for education and retirement savings plans.

The changes to taxation for companies would be equally dramatic. The proposal calls for reducing the corporate tax rate to 20 percent from 35 percent, a shift that is intended to make US companies more competitive around the world.

A new tax rate would be created for so-called pass-through businesses. These businesses, partnerships, and sole proprietorships whose profits “pass through” to their owners, would be taxed at a rate of 25 percent, not the individual rate of their owners, like under the current law. About 95 percent of businesses in the United States are structured as pass-throughs, and they generate a majority of the government’s corporate tax revenue.

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