Highlights of the GOP tax plan. It proposes to simplify the tax system, cut taxes for the middle class, and reduce taxes on businesses and corporations. Passage is a priority for President Donald Trump and Republicans, who are hoping for a major legislative victory to cite going into the 2018 elections.
--Income tax rates: Would set four income tax rates: 12 percent, 25 percent, 35 percent and 39.6 percent. The 25 percent rate would start at $90,000 for married couples and $45,000 for individuals; the 35 percent rate would apply to family income exceeding $260,000 and individual income over $200,000 -- which means many upper-income families whose top rate is currently 33 percent would face higher taxes. The current 39.6 percent top rate would apply to individual income exceeding $500,000 and earnings exceeding $1 million for married couples.
--Deductions: Would nearly double the standard deduction to $12,000 for individuals and $24,000 for couples, which means significantly fewer taxpayers would itemize deductions like mortgage interest. Would limit the mortgage interest deduction for new mortgages to the first $500,000 of the loan, instead of the present $1 million limit. Would eliminate the deduction for second homes. Would eliminate the deduction for state income taxes and caps the deduction for property taxes at $10,000. But personal exemptions of $4,050 for each family member would be eliminated.
--Tax credits: Would increase the per-child tax credit from 1,000 to $1,600 and extends it to families earning up to $230,000. There's also a new $300 tax credit for each adult in a family.
--Business taxes: Would cut the top corporate tax rate from 35 percent to 20 percent. Would lower the rate for many "pass-through" businesses currently taxed at individual rates to 25 percent, though service businesses such as law firms would not be eligible.
--Multinational corporations: Would establishe a 10 percent tax on profits by overseas subsidiaries of U.S. corporations and seeks to prevent tax gamesmanship that has moved U.S. companies overseas. Would permit "repatriation" of profits stockpiled overseas at a one-time 12 percent rate. Would tighten tax rules on U.S. operations of foreign companies.
--AMT: Would repeal the alternative minimum tax, a parallel tax structure aimed at ensuring that all people pay at least some tax. It has been criticized for excessive complexity.
--Estate tax: Would immediately double the exemption on taxation of large estates from $11.2 million to $22.4 million and repeal the estate tax entirely after six years.
