The tax rates that U.S. companies would pay on an estimated $3.1 trillion in earnings they’ve stockpiled overseas haven’t been finalized yet.
President Donald Trump promised everyday Americans a “giant tax cut for Christmas” in a speech that the White House billed as his closing argument for a tax overhaul that congressional Republicans finished negotiating on Wednesday.
“When I say giant, I mean giant,” Trump said in a televised speech from the White House. “As we speak, Congress has reached an agreement on tax legislation that will deliver more jobs, higher wages and massive tax relief for American families and for American companies.”
Trump said that a “typical” family of four earning $75,000 would see a tax cut of more than $2,000 under the legislation, “slashing their tax bill in half.” The White House didn’t provide an analysis backing up the claim.
The compromise bill is expected to set the U.S. corporate income tax rate at 21 percent, effective in 2018, according to a Republican official who asked not to be named because the discussions are private. The top federal corporate rate is now 35 percent, and Trump had insisted it should be no higher than 20 percent, but gave ground on that position earlier this month.
Trump said Wednesday that he’d support a 21 percent rate.
Lawmakers are also leaning toward keeping the estate tax, the official said. Both chambers called for doubling exemption limits for the tax, but the House bill calls for its full repeal in 2025. Negotiators are also planning to set a top individual tax rate of 37 percent–a reduction from the current 39.6 percent and a lower rate for high-income filers than in either the Senate of House versions of the overhaul, according to the official
The mortgage deduction limit would drop to $750,000 from the current $1 million, according to the official.
Rates on Offshore Earnings Not Yet Finalized
The tax rates that U.S. companies would pay on an estimated $3.1 trillion in earnings they’ve stockpiled overseas haven’t been finalized yet — and they may change depending on the final bill’s revenue score, said Representative Tom Reed, a Republican member of the House Ways and Means Committee.
The House voted last month to tax companies’ stockpiled offshore earnings at 14 percent for income held as cash, and 7 percent for less-liquid assets. The Senate’s bill this month set those rates at 14.5 and 7.5 respectively.
Under current law, companies can defer paying U.S. income taxes on their foreign earnings until they return, or “repatriate,” them to the U.S. The deferral provision has led companies to stockpile those earnings overseas. Lawmakers, who plan to cut the corporate income tax rate to 21 percent from 35 percent, intend to impose still lower rates on those accumulated earnings.
They also intend to introduce new taxes on certain types of foreign income in the future, while largely ending the deferral system and moving toward a “territorial” system that would focus on companies’ domestic profits.