WASHINGTON -- Drastically lower rates for businesses. Fewer income tax rates for individuals. A much larger standard deduction and child tax credit. A repeal of the estate tax.
A Republican framework for tax reform that has been in the works for months was presented Wednesday.
The blueprint, which President Donald Trump will discuss in a speech Wednesday, omits many critical details and numbers that congressional tax writers will have to decide on as they draft legislation.
It's not clear how closely the tax-writing committees will hew to that framework since it's been negotiated behind closed doors by just six key players from the White House, House and Senate.
And even that small group -- known as the Big Six -- took a long time to reach broad agreement.
The framework shrinks the number of tax rates to three from seven. The proposed rates are 12 percent, 25 percent and 35 percent. But it will be up to the tax committees to assign income ranges to each rate.
Also, the drop in the top rate to 35 percent from 39.6 percent might not stick.
The framework gives tax legislators the "flexibility" to add a fourth rate above 35 percent to ensure reform keeps the tax code at least as progressive as the current system.
If 35 percent remains the top rate, Democrats will charge that reform is just giving a big tax cut to the wealthy.
And even though the administration says it wants reform to offer middle class tax relief, the framework calls for a 12 percent bottom rate, which is higher than today's lowest rate of 10 percent.
But typical families in the 10 percent bracket today "are expected to be better off" when all the changes under reform are considered together, the blueprint says.
The plan doubles the standard deduction to $24,000 for married couples and $12,000 for single filers.
Doing so would drastically reduce the number of people who opt to itemize their deductions because the only reason to itemize is if individual deductions combined exceed the standard.
The framework calls for a "substantially higher" child tax credit, which today is worth $1,000 per child younger than 17.
It will be up to lawmakers to determine how much higher to make it. In addition, it would raise the income thresholds for eligibility for the credit, meaning more people would qualify for it.
The framework proposes the elimination of most itemized deductions, including the state and local tax deduction.
It also eliminates personal exemptions, worth $4,050 per person. So a family of four could no longer reduce taxable income by more than $16,000.
Again without specifics, the framework calls for lawmakers to retain tax incentives for home ownership, retirement savings, charitable giving and higher education.
But that doesn't mean lawmakers won't seek to modify the tax breaks that currently exist in these areas.
The Alternative Minimum Tax would go away. It most typically hits filers making between $200,000 and $1 million. It was originally intended to ensure the wealthy pay at least some tax.
What Republicans refer to as the "death tax" only affects about 0.2 percent of all estates -- and only those worth more than $5.5 million -- and would be killed.
The corporate tax rate would be cut to 20 percent. Such a drastic drop from today's 35 percent rate would put the U.S. rate below the 22.5 percent average in the industrialized world.
But doing so will be expensive. It's estimated to cost roughly $1.5 trillion over a decade.
A drop in tax rates on small businesses and other pass-throughs are proposed.
The top rate would be 25 percent, down from 39.6 percent on the profits of so-called pass-through businesses.
A pass-through passes its profits through to partners and shareholders, who then report them on their individual returns.
The framework will recommend the committees include measures to prevent gaming, in which people try to recharacterize their wages as pass-through profits to get the lower rate.
How U.S. multinationals are taxed would be changed.
Today, U.S. multinational firms pay a 35 percent tax on overseas profits when they bring them back to U.S. shores.
The framework calls for a switch to a "territorial system," where the overseas profits of U.S. companies would no longer be subject to U.S. tax, just to the tax of the government where the money was made.
The hope is the new system will make U.S. companies more competitive with their foreign counterparts, and that they will use more of their foreign profits to invest and create jobs in the United States.
But to dissuade U.S. companies from artificially shifting their profits to low-tax (or no tax) havens, the framework also would impose a minimum foreign tax, though the rate is unspecifiied.
In addition, it would offer a low, one-time tax rate on existing overseas profits to entice companies to bring that money back too. It's not yet clear if the tax would have to be paid even if the money isn't brought back.AlertMe