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Jeb Bush Sets Out His US Tax Reform Plan

by Mike Godfrey,, Washington

10 September 2015

Republican Party presidential candidate Jeb Bush has set out his US tax reform plan, which would establish a territorial tax system and cut both individual and corporate tax rates through the elimination of tax preferences.

Bush has set out the key elements of his Reform and Growth Act of 2017, which he would sign into law if he becomes US President next year. He would simplify the federal individual income tax code by reducing the number of tax brackets from seven to three. The new rates would be 10, 25, and 28 percent, thereby reducing the highest rate from 39.6 percent.

The plan would also double the standard deduction for both individual and joint filers; abolish the alternative minimum tax; expand and reform the earned income tax credit; end the estate tax; limit and cap itemized deductions, other than for charitable contributions; remove the 3.8 percent net investment income tax imposed under the Affordable Care Act; and cut the tax rate on capital gains back to 20 percent, while taxing "carried interest" as ordinary income.

He said that, with these reforms in place, "those earning USD200,000 or more will bear a greater share of our income tax burden than they do today, … [and] a family of four with an income below USD40,000 won't pay any income taxes at all."

In addition, Bush would look for a cut in the headline US federal corporate tax rate from the current 35 percent to 20 percent, through the repeal of "most" corporate deductions and credits. Businesses would be allowed a 100 percent immediate write-off for their capital investments, rather than the application of the existing system of depreciation schedules, but the present tax deduction for interest on corporate borrowing would be completely taken away.

Finally, he proposed a move from the present US system of taxing foreign earnings worldwide to a territorial system, without giving further details. He confirmed that he would allow the repatriation of the more than USD2 trillion in earnings held abroad by US multinationals, subject to a one-time tax of 8.75 percent, which would be payable over 10 years.

TAGS: individuals | capital gains tax (CGT) | inheritance tax | tax | investment | business | law | corporation tax | tax credits | multinationals | tax rates | United States | tax breaks | tax reform | individual income tax | business investment

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