The U.S. government introduced the “biggest tax reform” in the country’s history

Gary Cohn and Steven Mnuchin (left to right)

Photo: Carolyn Kaster / AP

The administration of Donald trump, reiterating his campaign promises, presented a plan for tax reform, entailing “the largest tax cut” in the country’s history. Benefits from the plan are concentrated on the side of the wealthiest Americans

The President of the United States Donald trump offers to drastically cut the tax on profit of business and withdraw from the taxation of the foreign profits of American corporations, reduce the maximum possible rate of income tax for individuals, eliminate taxes on inheritance and gifts, to the plan on Wednesday, April 26, presented by the Minister of the Treasury Steven Mnuchin and chief economic adviser to the White house Gary Cohn.

Earlier Wednesday, announcing the tax plan, Mnookin argued that it was “the largest tax reform and the largest tax cut” in the history of the United States.

Loophole for the rich

Unveiled a plan in General coincides with the tax promises trump in the election campaign in the summer and autumn of last year. Rate Federal income tax of companies proposed to be reduced by more than half, from 35 to 15%. And at the rate of 15% will be charged and structures, such as partnerships (LLC), which is now the Federal income tax is not levied (revenues of such companies are included in the personal tax returns of their owners). As a result, the use of the LLC, which may include a single partner that could provide a loophole for the richest Americans: is the individual income tax up to 30%, they can pay 15%. Trump is a businessman actively used a form of ownership LLC.

To return trillions home

Reducing taxes on business will be partially funded with one-time reduced tax on profits of us corporations repatriated from abroad. Now the American companies are obliged to pay a tax of 35% on profits earned worldwide, but the tax on foreign profits can be deferred until, until the company will return the money in the United States. The administration trump wants to stimulate the repatriation of foreign profits because of the lower tax (according to Bloomberg, it may be 10%), after which the authorities will go to the “territorial” principle of taxation, cease to tax the international profits of American corporations.

Mnuchin at the presentation of the plan declined to name the possible size of one-time tax on overseas profits, saying only that the administration is working on this with the Senate and the house of representatives, and assured that it will be “very competitive rate which will allow you to return the trillions of dollars.”

Reductions for citizens

In the field of personal taxes, the government trump proposed to simplify the income tax is to reduce from seven to three the number of rates applicable to income of an individual taxpayer or married couples within a progressive tax system. According to the current legislation of the spouse, for example, earn two more $471 thousand per year (the most wealthy category from the point of view of income tax), you pay 10% on the first $18.7 thousand, 15% with the subsequent $57.2 thousand, 25% — with a subsequent $77,2, etc. (a total of seven tiers with a maximum rate of 39.6% applied to the portion of income that exceeds $470,7 million). Trump offers to leave only three rates — 10, 25 and 35%, but since no clear levels of income, to apply these rates, it is impossible to say how to change the tax burden on different groups of citizens. Institute Tax Policy Center estimated in October, based on the election program of the trump that his tax plan on average will lower taxes for all groups, subdivided according to the degree of security, but for the more wealthy families the effect will be more impressive.

The administration has also promised to increase by almost half so-called standard tax deduction so that a married couple will be exempt from taxation the first $24 million of their total annual income. “Essentially, we introduce a zero tax rate — Yes, zero rate for the first $24 thousand earning spouses,” said Gary Cohn at the briefing.

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