White House unveils dramatic plan to overhaul tax code in major test for Trump

By Damian Paletta April 26 at 1:37 PM 

President Trump on Wednesday proposed a dramatic overhaul of the tax code, calling for sharply lower rates for individuals and businesses but also eliminating key tax breaks.

The proposal is an outline – key details are left unfinished – but it presents an initial offer to begin negotiations with lawmakers, as White House officials believe reworking the tax code is one of their biggest priorities to boost economic growth.

“We have a once in a generation opportunity to do something big and important on taxes,” White House National Economic Council Director Gary Cohn said Wednesday.

White House officials are ambitious, but the path to overhauling the tax code is riddled with political landmines. Many budget experts believe the White House’s plan would reduce federal revenues by so much that it would grow the debt by trillions of dollars in the next decade, growing interest costs and slowing the economy.

And Trump’s advisers are looking to axe some tax breaks that are very popular in certain states, including the deduction Americans take for the state and local taxes they pay separately each year. Eliminating this deduction could save more than $1 trillion over 10 years, but inflame lawmakers and governors in states that have high income tax rates.

The central feature of the White House’s plan would be a big reduction in tax rates for virtually all Americans and businesses.

It would eliminate the seven existing income tax brackets and replace them with three brackets, containing new rates of 10 percent, 25 percent, and 35 percent, based on someone’s income. White House officials haven’t specified which income levels would hit the higher tax brackets, as they see that as part of ongoing discussions with Capitol Hill.

It would also roughly double the standard deduction that Americans can use to reduce their taxable income. The deduction for married couples would move from $12,600 to $24,000. This would incentivize people not to itemize their tax returns and instead use the standard deduction, simplifying the process and potentially saving taxpayers thousands of dollars each year.