The Trump administration has proposed slashing the rate of corporation tax with the aim of spurring economic growth, the Treasury Secretary said.
Steven Mnuchin unveiled President Trump’s blueprint, which aims to cut the business tax rate from 35% to 15%.
Economists say the policy would add trillions of dollars to the deficit over the next decade.
But Mr Mnuchin said the tax plan would pay for itself “through growth, through deductions and closing loopholes”.
Secretary Mnuchin, joined White House chief economic adviser Gary Cohn on Wednesday to announce the tax proposal, which he billed as “the biggest tax cut” in history, but it is unclear whether that will really prove to be the case.
Devil’s in the detail – Analysis by Anthony Zurcher, BBC News
During his presidential campaign, Donald Trump released a tax plan that was fairly traditional by Republican standards and fairly light on details.
Now the Trump administration has released a new, different tax plan. It is also fairly traditional by Republican standards and equally vague.
The White House wants taxes to go down, but for whom? And how will it be paid for?
“We will let you know the details at the appropriate moment,” Trump economic advisor Gary Cohn said during the unveiling of the one-page, bullet-pointed outline.
Political devils love to hide in such details.
What seems certain is that, like the recent healthcare debate, the forthcoming tax battle will set Republicans at each other’s throats.
While conservatives traditionally have never met a tax cut they didn’t like, many in Congress have taken strong positions in recent years against adding to the budget deficit.
Mr Trump’s proposals will surely balloon the deficit unless they’re offset elsewhere, which will take more than the promised economic growth and loophole closing.
Once again, the heavy lifting on policy is left to Congress. The end result may not look at all like today’s plan – and, like healthcare, it may prove difficult to pass.
The Republican president’s plan will act as a guide for Congress as they try to pass a tax reform bill in the months ahead.
It could face resistance from fiscal hawks within his own party.
Democrats are highlighting the fact that Mr Trump’s own tax liability from his businesses would shrink under his blueprint, saving him millions.
Democratic Party chairman Tom Perez renewed a call for Mr Trump to release his tax returns to better understand how much he would gain from the plan.
“We must know how much Trump would personally financially benefit from his own proposal,” he said.
Also mentioned in the president’s broad outline:
- some sort of repatriation tax, giving big companies an incentive to bring back money they hold overseas
- tax breaks for childcare expenses
- doubling the amount of standard tax deduction
- a cut in individual rates, although few details expected yet
- more tax rate cuts for hedge funds, and other enterprises that pay taxes at individual rates
- eliminate seven existing tax brackets and replace them with three brackets at rates of 10%, 25% and 35%
Mr Trump’s blueprint is not expected to include any proposals for raising new revenue.
The much-discussed border tax that would put a tariff on imports – favoured by House Speaker Paul Ryan – will not be in the plan.
And nor will Mr Trump’s $1tn (£779bn) infrastructure improvement plan feature.
The White House is also working to include an expanded child and development care credit, for which Mr Trump’s daughter, Ivanka, has advocated.
Democrats are not expected to back a plan which adds to the national debt.
That means Republicans, who control the House and the Senate, may be forced to work under a budget procedure which allows them to proceed without them.
President Trump would like to see Congress pass tax reform by the middle of autumn, says the White House.
Republican lawmaker Kevin Brady, who heads the House Ways and Means Committee and co-chairs Congress’ tax-writing panels, praised the broad tax outline.
“I think the bolder the better in tax reform,” he said. “I’m excited that the president is going for a very ambitious plan.”
Senator Orrin Hatch, a Utah Republican, questioned whether lowering tax rates for small businesses, known as S corporations or “pass through” businesses, was beneficial.
Though “pass through” entities are typically small businesses, parts of Mr Trump’s own real estate conglomerate also qualify, giving Democrats more ammunition in opposing the plan.
Democrats have also criticised Mr Mnuchin’s claim that economic growth would create enough new tax revenue to cover the corporate tax cuts.
Democratic Senator Sherrod Brown called the 15% rate workable only “if you want to blow a hole in the federal budget and cut a whole lot of things like Meals on Wheels and Lake Erie restoration and then lie about the growth rate of the economy”.
California Democrat Ted Lieu described the proposal as “mathematically impossible”.