Last week, Republican leaders in the U.S. House of Representatives unveiled a new plan to overhaul the U.S. tax code as part of a broader agenda: “A Better Way” by Speaker Paul Ryan (R-Wisconsin) and the House Republicans.
The tax plan was the last of six policy whitepapers released under the categories of poverty, national security, the economy, the Constitution, health care and tax reform. With limited days remaining in this year’s congressional calendar, the agenda is meant to serve as a roadmap for House Republicans in 2017 and beyond, depending on the makeup of the U.S. Senate, House and Presidency after the November elections.
The GOP plan would make substantial changes to both individual and business tax rates. The blueprint would cut the number of individual tax brackets from seven to three while dropping the top individual tax rate from 39.6% to 33%. The blueprint would also increase the standard deduction to $24,000 for married individuals filing jointly, $18,000 for single individuals with a child in the household and $12,000 for other individuals.
In addition, the blueprint eliminates all itemized deductions except the mortgage interest deduction and the charitable contribution deduction. It would reduce the tax on investment income by allowing individuals and families to deduct 50% of their net capital gains, dividends and interest income, leading to rates of 6%, 12.5% and 16.5% in investment income, depending on the individual’s tax bracket.
In terms of business taxes, the GOP blueprint would cut the corporate tax rate from 35% to 20% and create a new business tax rate for small businesses separate from the individual rates. Small businesses—like most Big “I” agencies—that operate as sole proprietorships or pass through entities such as partnerships, LLCs and S corporations would face a maximum tax rate of 25%. Notable for both individuals and small business owners, the plan would also completely eliminate the estate tax.
The entire 35-page plan is available online.
Wyatt Stewart is Big “I” senior director of federal government affairs.