(Reuters) - Republicans in the U.S. House of Representatives on Thursday released details of tax legislation calling for slashing taxes on corporations, along with many other changes.
Based on summary documents obtained by Reuters and other press reports, here are the bill’s basic features, which were expected to change as the tax debate unfolds in weeks ahead:
- Reduce the U.S. corporate income tax rate to 20 percent from a current statutory 35 percent.
- Modernize international tax system for corporations so they “will no longer be held back by an outdated ‘worldwide’ tax system.” Republicans have proposed moving to a territorial tax system that no longer imposes the U.S. corporate tax on foreign profits of U.S. companies.
- Create a 10 percent tax on U.S. companies’ high-profit foreign units, calculated on a global basis, to discourage shifting profits abroad, according to The Wall Street Journal.
- The Journal also reported that Republicans are proposing a tax on foreign companies operating in the United States of up to 20 percent on payments made abroad from U.S. operations. This would discourage them from loading up U.S. units with deductions and pushing profits to low-tax jurisdictions, the Journal said.
Companies could lower those taxes by agreeing to have more operations in the U.S. tax system, it said.
- The summary calls for making it “easier and far less costly for American businesses to bring home foreign earnings.” Republicans had earlier proposed requiring U.S.-based multinational corporations to bring into the United States at sharply reduced tax rates about $2.6 trillion in foreign profits now being held abroad on a tax-deferred basis. Details on the status of that proposal were not immediately available.
- Cap the maximum tax rate on small businesses and other non-corporate enterprises to 25 percent, down from the present maximum rate on “pass-through” income of 39.6 percent.
- Set standards for distinguishing between individual wage income and actual pass-through business income to prevent tax-avoidance abuse of the new, lower tax level.
- Allow immediate and full expensing of capital investments.
- Allow small businesses to deduct interest costs.
- Preserve the research and development tax credit.
- Consolidates the number of tax brackets from seven to four: 12 percent, 25 percent, 35 percent and 39.6 percent, which is the existing top rate for high-income earners and would be retained.
- Increase the standard deduction for taxpayers to $12,000 from $6,350 for individuals, and to $24,000 from $12,700 for married couples.
- Preserves the home mortgage interest deduction for existing mortgages. The deduction for newly purchased homes would be capped at $500,000.
- Caps the deduction for state and local property taxes at $10,000.
- Retains popular retirement savings programs including the 401(k) and IRA pension plans.
- Expands the child tax credit to $1,600 from $1,000, and establishes a new $300 credit for each parent and non-child dependent. Also preserves the child and dependent care tax credit.
- Preserves the earned income tax credit.
- Preserves the deduction for charitable giving.
- Changes higher education benefits, such as college tuition, with further details not immediately available.
- Repeals the individual alternative minimum tax on high-income taxpayers.
- Doubles the exemption from the estate tax on inherited assets and repeals the tax over six years.
Editing by Kevin Drawbaugh and David Gregorio