In a dramatic move, the Donald Trump administration on Wednesday announced what it dubbed as “biggest tax cut” and largest tax reform” in the history of the United States, justifying it on the ground that it would act as a catalyst to economic growth, creation of jobs as well increase middle-class prosperity.
Such reductions have been proposed for both personal income tax as well as corporate tax, with the latter seeing a cut from 35 percent to 15 percent.
Announcing the plan, Treasury Secretary Steve Mnuchin said:
Treasury Secretary Steve Mnuchin Right now we have a 35 percent corporate rate on worldwide income and deferral. It is perhaps the most complicated and uncompetitive business rate in the world...Under the Trump plan, we will have a massive tax cut for businesses and massive tax reform in simplification... We will lower the business rate to 15 percent...The President is determined to unleash economic growth for businesses. This is not just about large-corporations. Small and medium-sized businesses will be eligible for the business rate as well.
Though Mnuchin stressed upon the aspect of economic growth – reiterating the objective of reaching 3 percent or higher GDP growth – concerns have already been raised about how the plan would worsen the deficit. It is being predicted that such a plan could help add over a trillion dollars as debt in a decade, up and above the 20 trillion dollars which is already existing.
However, a major obstacle exists, in that, for this massive overhaul plan to come to fruition, it would need the approval of the Democrats in the Senate. Notably, during the tenure of previous Democratic President Barack Obama, Republicans had criticised the increasing debt of the government.
Moreover, the debilitating impact of tax cuts on increasing debt has already been reiterated by Joint Committee on Taxation which is non-partisan.
(With inputs from AP and NBC News)