WASHINGTON -- U.S. corporations would get the largest federal income-tax rate cut in history, and their foreign earnings would no longer face domestic taxes when they return to the U.S. under a plan that House Republicans unveiled Friday.
The changes would remove incentives for U.S. companies to seek offshore tax addresses for lower tax bills, said Rep. Kevin Brady, the chairman of the tax-writing House Ways and Means Committee.
"America will leapfrog from dead last" among developed economies in terms of business-friendly tax policy "to the lead pack," said Brady, R-Texas.
Many business owners, including those who receive income from partnerships, would also pay far lower rates on their earnings. And investors would receive a cut of 30 percent or more in the rate they pay on gains.
The Republican tax-overhaul blueprint, a goal of House Speaker Paul Ryan of Wisconsin, also offers rate cuts on individuals' regular income by consolidating the seven existing tax brackets to three. The top bracket's rate would be 33 percent, down from 39.6 currently. And a near-doubling of the standard deduction would be a boon for middle-class taxpayers.
The plan contains some familiar Republican goals: abolishing the estate tax, which applies to estates worth more than $5,450,000; simplifying most taxpayers' returns down to the size of a postcard; and streamlining the Internal Revenue Service.
"We want America to be the best place in the world to do business," Ryan said.
Under the plan, part of a six-volume election-year policy agenda that House Republicans have rolled out this month, the statutory corporate income-tax rate would drop to 20 percent from 35 percent. It would be "the largest corporate tax cut in U.S. history," according to a written description of the plan.
While Brady said the 35-page tax blueprint is designed to be revenue-neutral, it provides no detail on how much the various proposals would cost. Tax cuts would be paid for by eliminating various deductions, exemptions and credits for individuals and businesses, according to the document, but they aren't specified.
For individuals, the plan would retain deductions for home mortgage interest and charitable contributions; and companies would still be eligible for research and development tax credits.
The proposal assumes its tax cuts would spur economic growth that would help make up a revenue shortfall. House Republican leaders haven't yet developed an estimate for how much growth would result, according to aides who described the plan before its release and asked that their names not be used.
The lower corporate tax rate would be combined with a new "destination basis" for cross-border transactions: Products and services that are exported outside the U.S. would no longer be taxed -- while any products and services that are imported would be.
"This will eliminate the incentives created by our current tax system to move or locate operations outside the United States," the blueprint document says. "It also will allow U.S. products, services and intangibles to compete on a more equal footing in both the U.S. market and the global market."
For individuals, the plan sets up a new effective top tax rate of 16.5 percent on net capital gains, dividends and interest income. Currently, long-term capital gains are taxed at a top rate of 23.8 percent.
Larger standard deductions of $24,000 for married couples, $18,000 for single filers with children and $12,000 for single filers -- up from $12,600, $9,300 and $6,300 respectively -- would mean breaks for lower- and middle-income taxpayers. In 2011, almost two-thirds of taxpayers claimed standard deductions -- and of that number, more than 90 percent reported adjusted gross incomes of less than $75,000. The increased deductions ensure that no one in the lowest tax bracket currently would pay more, according to the plan.
Brady said Republicans will seek public input on how to strengthen the plan.
"Tax reform only happens once a generation -- and it can be too easily hijacked" by special interests, he said.
Said Majority Whip Steve Scalise of Louisiana: "Ultimately, the American people are going to make this decision in November."
Information for this article was contributed by Laura Litvan of Bloomberg News.
A Section on 06/25/2016