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The Trump administration proposed reducing the number of federal income tax brackets to three from seven as part of a plan unveiled Sept. 27 to overhaul the federal tax code.
The proposed federal tax brackets would be 12, 25, and 35 percent. The seven tax brackets now in effect have rates of 10, 15, 25, 28, 33, 35, and 39.6 percent.
In an income tax plan released April 26, President Donald Trump proposed to reduce the number of brackets to 10, 25, and 35 percent. The tax code includes an optional federal flat rate for supplemental wage withholding of 25 percent and a mandatory federal flat rate for supplemental withholding of 39.6 percent.
“An additional top rate may apply to the highest-income taxpayers to ensure that the reformed tax code is at least as progressive as the existing tax code and does not shift the tax burden from high-income to lower- and middle-income taxpayers,” the administration said in its tax reform framework, which was developed by the Trump administration, the House Committee on Ways and Means, and the Senate Committee on Finance.
Republican leaders in the House and Senate have said the goal on Capitol Hill was to pass the plan by the end of the year. A resolution from the Senate Budget Committee set Nov. 13 as the deadline for a bill to be drafted.
“I’m very confident that the House and the Senate are working as quickly as they can,” White House economic adviser Gary Cohn said Sept. 28 at a White House press briefing. Rep. Kevin Brady (R-Texas), chairman of the House Ways and Means Committee, and committee members are working every day on the plan, Cohn said.
“We would hope that we get through the House in October,” Cohn said. “We would hope to be in the Senate in November. And we would hope to have a bill done by this year.”
The plan, which serves as a template for the tax-writing committees to develop legislation, also calls for a more accurate measure of inflation for purposes of indexing the tax brackets and other tax parameters.
Additionally, the framework proposed to expand the child tax credit. The first $1,000 of the credit would be refundable as under current law, the proposal said. The income levels at which the credit starts to phase out would be increased, it said.
“The existing childcare credit will stay refundable,” Cohn said. “The additional money that will be put into the credit will be nonrefundable. We want to encourage people to work. We want to have people have taxable income to take the credit against. The size of it, we’re still working out.”
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
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