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Trump proposes slashing corporate, individual tax rate to spur economy

The tax proposal aims at lowering corporate tax from 35% to 15% and the number of income tax brackets from seven to three at 10 per cent, 25 per cent and 35 per cent. Photograph: (AFP)

AFP Washington, United States Apr 26, 2017, 07.40 PM (IST)

The Donald Trump administration has proposed to dramatically slash corporate tax rates to spur economic growth and boost job creation, the White House said, a move that will also benefit the president's own company.

Dubbing it as the largest-ever tax reforms in US history, the White House said the rate of corporation tax would be lowered from 35 per cent to 15 per cent.

Gary Cohn, the chief economic advisor to US President Donald Trump, and Steven Mnuchin, the treasure secretary, also announced that they would simplify tax declaration for individuals.

Analysts say cutting the top corporate rate to 15 per cent could add more than $2 trillion to the deficit over a decade.
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The administration wants to cut the number of income tax brackets from seven to three (10 per cent, 25 per cent and 35 per cent).

"We are going to cut taxes for businesses to make them competitive and we're going to cut taxes for the American people especially low- and middle-income families," said Cohn, who heads the new National Economic Council.

Cohn also underlined the need to overhaul the tax system to make US corporates more competitive.

The proposed reforms were unveiled to the media in a one-page, bullet-pointed outline.

When asked questions about the fine print of their plan, White House said: "We will let you know the details at the appropriate time."

Cohn and Mnuchin maintained that the "once-in-a-lifetime" reforms were all about "creating job and economic growth" when they were asked by the media about how the cut in corporate taxes would benefit Trump personally.

Rich-friendly reforms?

Analysts say cutting the top corporate rate to 15 per cent could add more than $2 trillion to the deficit over a decade.

They also dispute White House expectations that the tax cuts will boost economic growth and bring in enough revenues to offset the cost. That assumption is unrealistic, they say.

Guardian quoted critics as saying that the proposed big bang is a figleaf and "basically a huge tax cut for the rich".

They believe that the potential burgeoning of the fiscal deficit would result in fall in the standard of living.

Some sections of the media have also pointed out that the new tax plan is opaque and lacks clarity.

The White House officials did not provide sufficient details on how the tax cuts would be paid for at a time when Congress is riven by concerns over US debt and deficit spending.

Simplified declarations 

For individuals, the reform promises to simplify tax declaration by, among other things, reducing the number of income tax brackets from seven to three, at 10 per cent, 25 per cent and 35 per cent.

The standard tax-free deduction would be doubled, a change Cohn said would amount to "a zero tax rate" on a married couple's first $24,000 in annual income.

The proposal also calls for eliminating a 3.8 per cent tax on investment income used to help meet costs under for President Barack Obama's health care program, and the Alternative Minimum Tax, paid by people and companies who enjoy large deductions on standard income tax.

(WION with inputs from AFP)

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