World Economy

Final Tax Bill Slashes US Corporate Rate

Final Tax Bill Slashes US Corporate Rate
Final Tax Bill Slashes US Corporate Rate

Congressional Republicans unveiled the final version of their dramatic US tax overhaul—debt-financed cuts for businesses, the wealthy and some middle-class Americans—and picked up crucial support from two wavering senators ahead of planned votes by lawmakers early next week.

Passage of the biggest US tax rewrite since 1986 would provide Republican lawmakers and President Donald Trump their first major legislative victory since he took office in January. Prospects for approval soared after Republican senators Marco Rubio and Bob Corker pledged support, Reuters reported.

The final version hammered out between the senate and house of representatives Republicans after each chamber previously passed competing versions contained no surprises.

It would cut the corporate income tax rate to 21% from 35%, according to a summary distributed to reporters by congressional tax writers. Corporate tax lobbyists have been seeking a tax cut of this magnitude for many years.

The bill, the summary showed, would create a 20% business income tax deduction for owners of “pass-through” businesses, such as partnerships and sole proprietorships; allow for immediate write-off by corporations of new equipment costs; and eliminate the corporate alternative minimum tax.

Under a new territorial system, the bill would exempt US corporations from taxes on most of their future foreign profits. It also sets a one-time tax for companies to repatriate more than $2.6 trillion now held overseas, at rates of 15.5% for cash and cash-equivalents and 8% for illiquid assets.

If passed by Congress, the changes would be in effect for 2018 taxes, with tax returns for 2017 unaffected. Democrats have been unified against the measure, calling it a giveaway to corporations and the rich that would drive up the federal deficit.

Bernie Sanders, a leading liberal voice in the senate who unsuccessfully sought the Democratic presidential nomination last year, called the bill “a moral and economic obscenity.”

“It is a gift to wealthy Republican campaign contributors and an insult to the working families of our country,” Sanders said.

The tax bill was expected to add at least $1 trillion to the 20 trillion US national debt over 10 years, making it an unusual example of deficit spending on stimulative tax cuts at a time when the economy is already expanding.

The Republican bill would maintain the existing seven individual and family income tax brackets with rates of 10, 12, 22, 24, 32, 35 and 37%. That top rate, for the highest-earning Americans, would be cut from today’s 39.6%.

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