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President Trump unleashed a new plan for tax reform in a speech at the Indianapolis State Fairgrounds on Wednesday.
The plans are the product of discussions between White House Treasury Secretary, Steve Mnuchin, the House Ways and Means Chairman, Kevin Brady, the Senate Finance Chairman, Orrin Hatch, House Speaker, Paul Ryan, Senate Majority Leader, Mitch McConnell, and White House economic policy chief, Gary Cohn. Their purpose will be to strengthen the middle class, grow the economy, and engender economic recovery by broadening the tax base, closing loopholes, and fostering growth.
According to a press release by the Treasury Department, the reforms will mean that less of the earnings of middle-class families will be subject to Federal income tax, and will reduce the number of tax brackets from seven to three: 12%, 25%, and 35%. It will also increase child tax credits and repeal the death tax and alternative minimum tax.
For business, the reforms seek to reduce the corporate tax rate to 20% and limit the taxation imposed on small and family-based businesses operating as sole proprietorships and small businesses corporations to 25%.
“This has been a long time coming. Instead of a source of pride, our tax code has become a constant source of frustration. It’s too big. It’s too complicated. It’s too expensive. Today, we are taking the next step to liberate America from our broken tax code.”
Similarly, the House Freedom Caucus, which is comprised of Congress’ most conservative members, said in a statement:
“President Trump has delivered a forward-looking tax reform framework that will let hard-working Americans keep more of their money, simplify our system, end carve-outs for special interests, and will help make our businesses competitive abroad. The Freedom Caucus looks forward to sending a final bill based on this framework to President Trump’s desk as soon as possible.”
Senate majority leader, the Republic Senator from Kentucky, Mitch McConnell, is planning to introduce a bill, to the US Senate next week. The bill, nicknamed ‘Graham-Cassidy, will represent the Republican’s latest attempt to repeal and replace Obamacare.
The bill is named after the bill’s sponsors: the Republican Senator from South Carolina, Lindsey Graham, and the Republican Senator from Louisiana, Bill Cassidy. Republicans are under pressure to get the bill passed before the opportunity to pass it with a simple majority expires with the Reconciliation Bill on September 30th.
The objective of the Graham-Cassidy Bill is to abolish individual and employer insurance mandates and to increase the power of state governors to veto certain regulation in their state. Along with individual and employer mandate, it will eliminate:
- Medicaid expansion
- Cost-sharing subsidies
- Tax credits
And will make changes to:
- Traditional Medicaid
- Essential health benefits
- Price restrictions on older Americans
- Health savings account.
Under the Graham-Cassidy, Bill states will receive their Medicaid funding through block grants. This change will put an end to the Obamacare’s Medicaid program where states could have ninety-percent of their funding for new beneficiaries subsidized by Washington. This encouraged the states to expand their Medicaid programs to include individuals and families earning up to 138% of the Federal poverty level.
Under this new system, southern states that did not expand their Medicaid programs stand to receive more federal funding. Furthermore, the bill will also give greater power to the states by allowing them to spend their funding as they see fit.