WASHINGTON (Reuters) – U.S. President Donald Trump on Wednesday proposed the biggest tax overhaul in three decades – a plan that would slash rates on businesses and the wealthy – but it faces an uphill battle in Congress with his own party divided and Democrats hostile.
The plan offered scant details about how to pay for the cuts without dramatically driving up federal deficits. It was forged during months of high-level talks among Trump’s aides and top Republicans in Congress.
The proposal would lower corporate income tax rates, cut taxes for “pass-through” businesses, reduce the top income tax rate for individual Americans and scrap some widely used tax breaks including one that benefits people in high-tax states dominated by Democrats.
Big business embraced the plan, while Democrats voiced opposition. Republicans have produced no major legislative successes since Trump took office in January even though they control the White House and both chambers of Congress.
The tax plan was outlined the day after the Republicans’ top legislative priority, an overhaul of the U.S. healthcare system, collapsed in the Senate, while another key item on Trump’s wish list, infrastructure spending, has yet to materialize.
A comprehensive tax overhaul has eluded lawmakers for decades. The last one was passed in 1986.
Trump has said the tax overhaul would provide tax relief to middle-class Americans, and the White House said that under the proposal typical middle-class families would have less of their income subject to federal income tax.
The plan foresees a 20-percent corporate income tax rate, down from 35 percent now. Trump had initially proposed a 15-percent rate. Companies in the United States pay high taxes by global standards and they have been seeking a tax cut for years, even though many of them pay much less than the headline rate due to loopholes and tax breaks.
“I think it’s a big step forward,” Senator Pat Toomey, a prominent Republican on the Senate Finance Committee, told reporters. “This is very, very constructive, that the relevant parties are on the same page.”
Trump has appealed to Democrats to support the plan, although they were not consulted in drafting it.
Republicans hold a thin 52-48 majority in the Senate and may need some Democrats on board to win passage. But Democrats said the plan would expand the federal deficit in order to deliver tax cuts to wealthy Americans rather than the middle-class families that Trump…