President Donald Trump and congressional Republicans may tackle tax reform as early as late spring, White House press secretary Sean Spicer said.
But what that tax overhaul will look like is a detail the White House and Republicans still have to hammer out.
Republicans have proposed two tax reform proposals: Trump’s plan and House Speaker Paul Ryan’s.
Lower taxes for the top 1%
Currently, there are seven tax brackets, the lowest marginal tax rate being 10% and the highest 39.6%. Ryan’s plan would reduce that number to three: 12%, 25% and 33%.
Under the current tax code, a single filer earning $100,000 pays 28% of their income, or $28,000, in tax.
Under Ryan’s plan, the same filer would pay 25%, or $25,000, in tax — a savings of $3,000. Meanwhile, under the current tax code, a filer earning $500,000 pays 39.6% in tax, or $198,000. Under Ryan’s plan, the same filer would pay 33%, or $165,000 — a savings of $33,000.
But that isn’t the whole picture. Ryan’s plan would also cut taxes on investments, dividends and capital gains by about half, a major boon for the top 1%. In 2013 (the most recent year for which data are available), the top 1% earned 38% of their income in capital gains, according to the Congressional Budget Office.
The Tax Policy Center, a liberal tax policy think tank, estimates that, under Ryan’s plan, those with incomes greater than $1 million would pay $302,000 less in tax in 2025 — an 11% increase in after-tax income. The bottom 80%, meanwhile, wouldn’t see their after-tax incomes change by more than half a percent in either direction. People making between $40,000 and $50,000 would see an extra $120, TPC estimates.