White House chief economic advisor Gary Cohn and Treasury Secretary Steven Mnuchin have unveiled a “broad brush look” at a White House tax plan. The plan includes lowering the top tax rate paid by large corporations from its current 35 percent to 15 percent. It would also allow owners of small businesses currently structured in a way in which they must pay individual tax rates on business income (called “passthrough”) to also pay business-related income at the 15 percent threshold instead of their personal rate. There are millions of these businesses, known as “S Corporations” and they are often small, family-owned firms.
The plan also calls for the elimination of the death (or estate) tax and the return of the capital gains tax to a 20 percent rate.
When asked if freelance or contract workers would be covered by the pass-through provision, Cohn said that was an issue that would be worked out with Congress.
Lowering of the corporate tax would bring it in line with other countries, said Mnuchin. Currently, the 35 percent tax rate on businesses has spurred trillions of dollars to be moved to other countries, where the rates are considerably lower.
The plan includes a “repatriation” tax holiday that would encourage U.S. global businesses to return profits to the U.S., according to Mnuchin.
Personal tax reform measures in the plan include lowering the number of tax brackets to three (10, 25 and 35 percent) and the repeal of the alternative minimum tax. If adopted, there would be only two tax deductions for personal taxes: mortgage interest and contributions to non-profits.
According to the plan, there will be an “elimination of loopholes” used by high net worth individuals, however, the loopholes were not listed.
The plan, which still must be detailed and translated into legislation, will face stiff opposition in congress.