Trump proposes tax cuts as spur to US prosperity

US President Donald Trump has proposed major cuts to corporation tax in an overhaul his administration said would spur economic growth and bring jobs and prosperity to America’s middle class.

The plan would also reduce investment and estate taxes aimed at the wealthy.

But administration officials said that action on other key tax code elements would ensure the plan would largely help the middle class instead of the affluent.

The White House has yet to spell out how much of a hole the tax cuts could create in the federal budget, maintaining that the resulting economic growth would reduce – if not eliminate – the risk of a soaring deficit.

The outlined changes to the tax code are the most concrete guidance so far on Mr Trump’s vision for spurring job growth.

“The President owns this plan; don’t be mistaken,” said Gary Cohn, director of the White House National Economic Council.

Mr Cohn said Mr Trump and his administration recognise they have to be “good stewards” of the federal budget.

But the plan as it currently stands could cause the federal deficit to climb, unless it sparks a massive and lasting wave of growth that most economists say is unlikely.

The threat of a rising budget deficit could erode support for the plan among politicians in Mr Trump’s own Republican Party.

Administration officials intend to agree additional details with members of the House and Senate in the coming weeks for what would be the first massive rewrite of the US tax code since 1986.

“We know this is difficult,” Mr Cohn said. “We know what we’re asking for is a big bite.”

As Mr Cohn and Treasury Secretary Steven Mnuchin explained, the plan would reduce the number of personal income tax brackets to three from seven: rates of 10%, 25% and 35%.

It would double the standard deduction for married couples to $US24,000 (£18,600), while keeping deductions for charitable giving and mortgage interest payments.

The administration plans to provide tax relief for families with childcare expenses, too, although the specifics have yet to be included.

The proposal would also trim other deductions utilised by wealthier Americans. This would include deductions for state and local tax payments, a change that could alienate support from politicians in states such as California and New York with higher state taxes.

“It’s not the federal government’s job to be subsidising the states,” Mr Mnuchin said.

The administration has emphasised that the plan was focused on simplifying the tax code and helping middle-class Americans.

The median US household income is slightly above $US50,000 dollars (£39,000) annually.

Still, the proposal could reduce the tax burden for the wealthy as well.

It would also repeal the estate tax, the catch-all alternative minimum tax and the 3.8% tax on investment income from President Barack Obama’s healthcare law.

The proposal has yet to be vetted for its precise impact on top earners, as several details are still being determined.

On the corporate side, the top marginal tax rate would fall from 35% to 15%.

Small businesses that account for their owners’ personal incomes would see their top tax rate go from 39.6% to the proposed corporate tax rate of 15%.

Mr Mnuchin stressed that the change for small business owners – a group that under the current definition could include doctors, lawyers and even major property companies – would be done to ensure that wealthier Americans could not exploit the change to pay less in taxes.