Trump vows big tax cut for US middle class

US President Donald Trump said a forthcoming tax reform plan would cut taxes “tremendously” for the middle class, as Republican conservatives said they could accept big revenue losses in exchange for aggressive tax cuts for businesses. As the administration and Republicans in Congress prepared to unveil a tax blueprint, Trump told a bipartisan group of lawmakers from the House of Representatives to expect a “very comprehensive” and “very, very powerful document.”

“We will cut taxes tremendously for the middle class — not just a little bit, but tremendously,” the president said.

With the latest Republican push to overturn Obamacare sputtering in the Senate, Republicans are under mounting pressure to overhaul the US tax code before year-end.

But up to now, the drive for tax reform has been repeatedly delayed and the plan was likely to be light on specifics.

Details of the plan that leaked out over the weekend showed that the corporate income tax rate would be slashed from 35 per cent to 20 per cent, the rate for “pass-through” businesses from 39.6 per cent to 25 per cent and the rate for top individual earners from 39.6 per cent to 35 per cent.

Without offsets such as the closing of lucrative tax loopholes to pay for lower tax rates, the tax cuts would lose about $5 trillion in revenue over a decade, according to the Tax Foundation think-tank.

Even fiscal hawks are showing a willingness to accept huge revenue losses, predicting aggressive tax cuts would drive economic growth high enough in future years to produce a flood of new tax revenues that would pay for lower rates.

Senate Republicans last week tentatively agreed that tax legislation could lose up to $1.5 trillion over a decade but become revenue neutral thereafter.

The chairman of the conservative House of Representatives Freedom Caucus said he would not support a tax reform plan with a corporate tax rate above 20 per cent or a small business rate above 25 per cent.

Another Freedom Caucus member registered support revenue losses greater than those agreed in the Senate.

“A lot of people are willing to go to $2 trillion. Getting the growth over 10 years will pay that back in no time, for real,” Representative Dave Brat of Virginia told reporters.

The Republican tax-cut plan is expected to call for a new rate for “pass-through” businesses of about 25 per cent, which would bring huge tax savings to millions of US business owners, a lobbyist familiar with the negotiations said.

About 95 per cent of American businesses are pass-throughs such as sole proprietorships, partnerships and S-corporations, according to the Brookings Institution, a Washington think-tank. for