U.S. government issues "maximum tax cuts in history" tax reform proposal

Abstract On the morning of the 27th, Beijing time, the White House held a special press conference to announce the tax reform plan containing the so-called “the largest tax cut in the history of the United States”. The tax cut will benefit enterprises, the middle class and some high-income people. But at the same time...
On the morning of the 27th, Beijing time, the White House held a special press conference to announce the tax reform plan containing the so-called "the largest tax cut in the history of the United States". Tax cuts will benefit enterprises, the middle class and some high-income people. But at the same time, it left the biggest question, who will bear the cost of this plan and how to bear it. President Trump did not participate in this conference.
President Trump’s chief economic adviser, Goldman’s former president Gary Cohn and Treasury Secretary Steven Mnuchin hosted a series of goals for tax reform on Wednesday, including companies and small companies of all sizes. The federal income tax rate with the partnership entity fell to 15%. In addition, the government will impose a one-off tax on US 2.6 trillion US dollars of profits previously retained by US companies. What is striking is that the new tax reform will shift to the territorial taxation system, which will end the tax on the profits that the company will earn overseas in the future.
Trump and the main promoter of the tax reform program, Nuchin (left) and senior economic adviser Cohen (left).
Sina US stocks Note: The territorial taxation system means that most of the overseas profits of the company need not be taxed to the US government. The current system is that American companies need to pay taxes to the US government no matter where they are in the world.
At the individual level, the tax reform plan proposes to change the current seven-level income tax rate system to third gear and reduce the maximum tax rate from 39.6% to 35%. In addition, the existing tax system that imposes a 3.8% net income tax on individuals with a one-year investment of more than $200,000 will be cancelled and the estate tax will be cancelled. At present, the US estate tax is only for the inheritance of more than 5.49 million US dollars inherited by the individual, and the inheritance of more than 1.09 million US dollars inherited by the husband and wife.
At the same time, the tax reform plan does not specifically mention how state and local taxation will be allowed for federal income tax deductions. For high-income earners in higher-status states such as New York and New Jersey, this is A blow. The only deductible items that are clearly reserved for the program are home mortgage interest and charitable donations.
Cohen pointed out: "In 2017, we still adhere to the corporate tax law of 1988. This is also a reason why the United States is one of the least developed countries when we talk about corporate taxation."

How tax cuts will generate net income
Reducing the tax rate of partnerships, limited liability companies and other so-called “transfer payment income tax” entities to 15% means that many companies will cut their tax rates significantly, including food stores that are necessary for life, hedge funds, and special Rump's own business empire. Under current tax laws, such companies pass on their profits and tax credits to the owners of the business, who will pay corporate income tax in the form of personal income tax.
Shortly after last year's election, Finance Minister Nuchin said that Trump's future tax reform plan "will never let the upper class's absolute tax reduction."
What is not immediately clear is whether the tax reform plan can rely on its own strength to make the government's tax revenue not significantly reduced. Nuchin and other government officials have said that tax reforms will stimulate economic growth and ultimately cover the cost of tax cuts. Some economists have doubts about this. They worry that under the supervision of Congress, any tax cuts by the Trump administration may be temporary and thus will not receive long-term effects.
Nuchin pointed out at the tax reform conference held on Wednesday morning: "This will be the largest tax cut and tax reform in the history of the country, and we promise to carry it out."

Democratic opposition
Trump’s ambitious goal of large-scale tax cuts will be a huge obstacle in Congress, including the resolute opposition of the Democrats, and the Republican Party’s question of how the tax reform plan can be compensated and whether it can be done is divided into two groups. . There is a rule in the US Senate that if any tax reform plan is passed by a simple majority rather than an overwhelming majority of 60 votes, then the federal deficit cannot be increased beyond the 10-year window.
Senator Democratic Party leader and Senator Chuck Schumer has promised to oppose any tax reform plan that will help taxpayers with the highest incomes. He said in the Senate on Wednesday morning: "If the president's plan is to cut taxes for the richest people in the country, that is, to benefit the rich and the rich, such as the president, the plan will not be passed by our Democrats. We don't need such a tax reform. It allows the wealthiest people to use their tax transfers to reduce their income tax rate to 15%, while ordinary Americans have to pay a much higher tax rate."

Everything is too early
The plan announced today by the White House does not specify whether and when it can achieve zero net impact on the government. Sina US stocks learned that if this is not done, the tax reduction plan must expire within 10 years. In addition, the plan does not mention the tax increase proposed by the Republican leaders of the House of Representatives, including the importation of overseas products and the regulation of border sales in the United States.
The White House’s proposal today is a reflection of some of the tax reform blueprints that Trump advocated during the campaign. According to the analysis of the non-partisan US Tax Policy Center, if Trump described it, the US government will pay 6.2 trillion US dollars in 10 years, and by 2036 will pay more than 20 trillion US dollars.
On Tuesday afternoon, Cohen and Nuchin reported the new tax reform plan to the Speaker of the House of Representatives Ryan, the Senate Majority Leader McConnell, and the Chairman of the House Appropriations Committee Brady and the Chairman of the Senate Finance Committee Hatch. When Hatch left the National Assembly, he poured cold water on the optimistic expectations that the White House and Congress will reach a major tax issue in the foreseeable future. He told reporters: "Everything is too early, we are just beginning." (Li Wu / Compile)

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