House Ways and Means Committee Chairman Kevin Brady discussed on Sunday the details of the final tax plan released by Republican lawmakers on Friday, which if passed, would be the largest overhaul in 31 years.
Congressional Republicans hope this week to pass the bill, which some critics argue benefits mostly businesses and the wealthy, and get it to President Trump’s desk by Christmas. Some of the biggest changes in the final legislation include lowering the corporate rate and most of the rates for individual income taxes, though it still keeps seven brackets.
“Maybe the biggest surprise here for everyone is that the Conference Committee report turned out a bill better than either in the House or the Senate—that rarely happens,” Brady, R-Texas, told Maria Bartiromo on “Sunday Morning Futures."
CORPORATE AND PASS-THROUGH TAX RATES
According to the new legislation, the tax rate on corporations would be cut to 21% from 35%, something business leaders and corporate tax lobbyists have waited years for. Currently, the U.S. has one of the highest corporate rates among developed nations, which GOP lawmakers say makes the country less competitive.
“I think the message to our global competitors, whether it’s China, Europe, Canada, Mexico, is America is never gonna fall this far behind again. … We’ll continue to make the changes in our tax code so we can bring these jobs back to America and our local businesses can compete and win anywhere in the world,” Brady said.
U.S. companies holding liquid assets overseas will see a one-time top tax rate—the “deemed repatriation” tax—of 15.5%, higher than the 10% President Trump originally called for. The top rate companies will see on fixed assets, which includes plants and equipment, will be 8%.
“It is higher than many people expected and higher, frankly, than I did going into these discussions,” the Texas congressman said. “This is all about balancing priorities, moving those rates forward, being as pro-growth as we can. Those dollars will come back.”
Companies organized as “pass-through” businesses, whose profits are “passed through” to their owners and are taxed on the owners’ individual income tax returns, would be allowed to deduct 20% of their income tax-free. Businesses classified as pass-throughs include S corporations, LLCs, sole proprietorships and partnerships.
INDIVIDUAL TAX RATES
Though early on the GOP had hoped to shrink the number of tax brackets for individual and family filers, the latest bill still keeps seven, though lowers most of the rates and almost doubles the standard deduction. The new rates would be 10%, 12%, 22%, 24%, 32%, 35% and 37%. The top rate, for America’s highest-income earners, would be slightly lower than the current 39.6%. These changes would expire at the end of 2025, thus the U.S. would revert to the old tax code rates and deductions.