Senate Republicans on Thursday unveiled a plan which would chop the corporate tax rate and make broad tweaks to the individual tax system. It contains key differences from a bill working its way through the House.
GOP senators contend the tax system overhaul will ease the burden on middle-income Americans while encouraging companies to boost hiring and wages.
Trimming the tax burden on businesses and individuals has long been a Republican goal. With unified control of the White House and both chambers of Congress, the GOP aims to pass a tax reform plan this year, despite lingering challenges.
Issues facing GOP lawmakers include budget deficits generated by the deep cuts, opposition from blue-state House Republicans and backlash from Democrats who say the proposals will not go far enough to help middle-class workers.
Here are some of the key features of the Senate plan, much of which was outlined by the Senate Finance Committee:
- The proposal chops the corporate tax rate from 35 percent to 20 percent. It would delay the change until 2019, a source told CNBC. In the House bill, that measure would take effect next year.
- The Senate plan would keep seven individual income tax brackets, a source told CNBC. A 12 percent bracket would replace the current 15 percent, while the top rate would get cut slightly to 38.5 percent. The House plan would reduce the number of brackets to four.
- Like the House bill, the Senate proposal would nearly double the standard deduction to $12,000 for individuals and $24,000 for married couples.
- The Senate plan would eliminate federal deductions for state and local taxes. The House bill also has this.
- It would not change the mortgage interest deduction, which allows deductions on interest for up to $1 million in mortgage debt. The House bill caps that figure at $500,000.
- It keeps popular tax breaks for 401(k) retirement accounts and charitable contributions.
- It aims to reduce the burden on pass-through businesses by adding a deduction.
- The Senate plan increases the child tax credit from $1,000 to $1,650.
- The proposal doubles the exemption for the estate tax, or so-called death tax, but does not eliminate it. The House plan repeals the estate tax after six years.
House Majority Leader Kevin McCarthy, R-Calif., on Thursday said the full House would vote on the proposal next week.