The Trump administration on Wednesday released a tax plan that proposes to sharply slash business taxes and steeply discount the rate on corporate profits brought back into the United States.
As per the proposals of the new plan, major cuts have been made in the income tax rate. the income tax rates have been slashed from 39.6% to 35%. The new plan has also sharply slashed the business taxes. Steep discounts have been announced on corporate profits that are brought back into the US.
A one-page summary of his proposals, released at a White House briefing, saidTrump also wants to reduce the number of tax brackets to three from seven.
Earlier, treasury secretary Mnuchin called the plan “the biggest tax cut and the largest tax reform in the history of our country.”
Under US law, only Congress can make major tax law changes. Lawmakers initially greeted Trump’s plan as a starting point for further discussion on overhauling the tax code.
The new plan proposes for a 15% corporate tax rate which is a sharp drop from the existing 35%. In addition, the new reforms aim to move to a territorial tax system that provides relief to both small and large businesses. It is also proposed to repeal the estate tax, the alternative minimum tax. In addition, tax relief will be provided to the families with child and dependent care expenses. Further, the number of tax brackets is expected to be brought down to three from seven.
However, under the US law, only the Congress is empowered to make major changes to the tax laws.
- The US stock market has greeted the plan with a shrug.
- The Dow Jones industrial average is up just 37 points, or 0.2%, with similar small gains on the S&P 500 and the Nasdaq.
- That’s because some of the details had already leaked, so were ‘priced in’, and also because it’s not clear that the plan can really be implemented.
Impact of new taxes
- These reforms are hailed as the biggest tax cut and largest tax reform in the history of the United States. According to the economists, the new tax reforms are likely to add trillions of dollars to the deficit over the next decade.
- As far as India is concerned, the reforms are expected to further push up stock markets which have already responded positively.