- GOP Releases Tax Reform Framework
- October 2, 2017
The White House and Congressional Republicans have released the Unified Framework for Fixing Our Broken Tax Code. The goals for the Framework, which is described as a template for the tax-writing committees, include providing tax relief for the middle class; simplifying the tax filing process; providing tax relief for businesses (with an emphasis on small businesses); ending incentives to send jobs, capital, and tax revenue overseas; and broadening the tax base, in part by ending special interest tax breaks and loopholes.
For US businesses, the Framework:
- Reduces the corporate tax
rate to 20%.
- Tax-writing committees to address potential abuse by charactering personal income as business income.
- Eliminates the corporate
Alternative Minimum Tax.
- Tax-writing committees may consider methods to avoid double taxation of corporate earnings.
- Establishes a maximum tax rate of 25% for small and family owned businesses conducted as sole proprietorships, partnerships, and S corporations.
- Calls for immediate expensing of investments in depreciable assets (other than structures) after September 27, 2017 for a minimum of five years.
- “Partially” limits deductions for net interest expense incurred by C corporations.
- Envisions the repeal or restriction of special exclusions or deductions, including the Section 199 domestic manufacturing deduction.
- Preserves the research and development and the low income housing tax credits.
For Multinational business, the Framework:
- Transitions to a territorial
- Provides a 100% exemption for dividends from foreign subsidiaries (at least 10% owned).
- Treats accumulated foreign earnings held overseas as repatriated, with a bifurcated rate for liquid and illiquid assets and payment for the tax liability spread out over several years.
- Taxes at a reduced rate the foreign profits of multinational corporations on a global basis.
- Envisions the adoption of rules to “level the playing field” between U.S.-parented and foreign-parented multinationals.
For individuals and families, the Framework:
- Nearly doubles the standard
deduct to $24,000 for families and $12,000 for individuals, while
eliminating personal exemptions.
- Increases the child tax credit and the income levels at which it begins to phase out.
- Provides a non-refundable credit of $500 for non-child dependents.
- Consolidates the current
seven tax brackets into three: 12%, 25% and 35%.
- Families in the current 10% bracket are expected to benefit from the larger standard deduction, larger child tax credit and additional relief.
- An additional top rate may apply to highest-income tax payers to avoid shifting the tax burden to the middle class.
- Eliminates the Alternative Minimum Tax.
- Eliminates most itemized deductions, but retains the home mortgage interest expense and charitable donation deductions.
- Retains tax benefits that encourage work, higher education, and retirement security.
- Repeals the estate tax and generation-skipping transfer tax.
- Reduces the corporate tax rate to 20%.