Big changes are coming to our tax code. Yesterday, Wednesday September 27th, Republicans revealed their proposed changes which include changes to tax brackets, corporate tax rates, and pass-through business tax rates. According to Senate Majority Leader Mitch McConnell “This framework is focused on supporting American jobs, on making taxes fairer and on growing families’ paychecks.”
Personal Tax Brackets
The proposed changes would shrink the current 7 personal tax brackets to just 3. These brackets would occur at 12%, 25%, and 35%, and would nearly double the standard deduction – the plan cuts the top individual income tax rate from 39.6% to 35%. Another big change for personal taxes is that the Child Tax Credit would be ‘substantially’ increased, although what that means numerically is still unclear. There is also a $500 credit for anyone taking care of a family member, no matter the age.
Corporate Tax Rate
The new tax framework also calls for changes to corporate tax rates. The corporate rate would be lowered from 35% to 20%. The changes would also bring down tax rates for ‘pass-through’ businesses to 25%. These types of businesses are currently taxed under the individual tax code. Other changes that will be important to corporations include an end to tax credit for research and development of low-income housing, and an end to deductions for domestic production. There are also changes in place to limit the tax deductions business are eligible for on borrowed funds.
The framework is available for reading as a PDF here .