The following briefly outlines the proposed tax reforms. To do it quickly, I pasted the outline from the Congressional web page and added my comments with my emphasis in bold and in red.
From Speaker of the House Paul Ryan’s webpage:
Lowers Rates for Individuals and Families
The framework shrinks the current seven tax brackets into three – 12%, 25% and 35% – with the potential for an additional top rate for the highest-income taxpayers to ensure that the wealthy do not contribute a lower share of taxes paid than they do today.
Doubles the Standard Deduction and Enhances the Child Tax Credit
The framework roughly doubles the standard deduction (TO $12,000 FOR INDIVIDUALS AND $24,000 FOR MARRIED COUPLES) so that typical middle-class families will keep more of their paycheck. It also significantly increases the Child Tax Credit. IT ELIMINATES PERSONAL EXEMPTIONS.
Eliminates Loopholes for the Wealthy, Protects Bedrock Provisions for Middle Class
To provide simplicity and fairness the framework eliminates many itemized deductions that are primarily used by the wealthy, but retains tax incentives for home mortgage interest and charitable contributions, as well as tax incentives for work, higher education, and retirement security.
Repeals the Death Tax and Alternative Minimum Tax (AMT)
The framework repeals the unfair Death Tax and substantially simplifies the tax code by repealing the existing individual AMT, which requires taxpayers to do their taxes twice. DEMOCRATS WILL GENERALLY BE OPPOSED TO BOTH REPEALS. Creates a New Lower Tax Rate and Structure for Small Businesses
The framework limits the maximum tax rate for small and family-owned businesses to 25% - significantly lower than the top rate that these businesses pay today. DIFFICULT TO PREVENT GAMING THIS CHANGE IN ORDER TO PREVENT HIGH INCOME WAGE EARNERS RECLASSIFYING THEIR INCOME AS BUSINESS INCOME.
To Create Jobs and Promote Competitiveness, Lowers the Corporate Tax Rate
So that America can compete on level playing field, the framework reduces the corporate tax rate to 20% – below the 22.5% average of the industrialized world. HIGHER THAN THE 15% TRUMP CALLED FOR.
To Boost the Economy, Allows “Expensing” of Capital Investments
The framework allows, for at least five years, businesses to immediately write off (or “expense”) the cost of new investments, giving a much-needed lift to the economy. IT ALSO CALLS FOR LIMITING THE ABILITY FOR BUSINESSES TO DEDUCT THEIR INTEREST EXPENSES.
Moves to an American Model for Competitiveness
The framework ends the perverse incentive to offshore jobs and keep foreign profits overseas. It levels the playing field for American companies and workers.
Brings Profits Back Home
The framework brings home profits by imposing a one-time, low tax rate on wealth that has already accumulated overseas so there is no tax incentive to keeping the money offshore. MOVES TO A TERRITORIAL RATHER THAN THE CURRENT GLOBAL TAXATION SYSTEM. THE U.S. IS THE ONLY DEVELOPED ECONOMY THAT USES GLOBAL TAXATION. IN MY OPINION, ONE OF THE MOST IMPORTANT CHANGES.
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