President Donald Trump proposed sweeping tax cuts for individuals and businesses Wednesday that he said would create new jobs and invigorate America's international competitiveness.
It won cautious approval from some Republican Colorado lawmakers but concerns from Democrats that it favors the wealthy.
Trump said his tax reform proposal would be "simpler and more fair for everyday Americans."
Highlights of the proposal include:
- Eliminating most itemized tax deductions but retaining incentives for home mortgage interest and charitable contributions;
- Limiting the tax rate for small and family-owned businesses to 25 percent;
- Reducing the corporate tax rate to 20 percent from the current rate that can run as high as 35 percent;
- Simplifying tax returns to what the proposal calls "the simplicity of 'postcard' tax filing;"
- Eliminating the double tax when American corporations return money earned and taxed abroad back to the United States.
"It's called the American model," Trump said.
Colorado taxpayers demonstrated their dislike for high taxes through the Taxpayer's Bill of Rights, which voters approved in 1992 as a state constitutional amendment. It limits the authority of the state government to raise taxes.
"Too many Colorado families have felt like they can't get ahead over the last few years and providing tax relief for hardworking families will jump-start the economy and put more money in their pockets," said Colorado Republican Sen. Cory Gardner. "The outline released today will serve as a blueprint for the House and Senate as they begin their bipartisan hearings on how we can best fix our confusing and oversized tax code."
Trump's "Unified Framework for Fixing Our Broken Tax Code" won high praise from Rep. Scott Tipton, R-Cortez, who said, "The framework announced today includes the principles I believe are necessary to allow individuals and families to keep more of the money they earn. The framework consolidates our tax brackets from seven to three and doubles the standard deduction for individuals and families, so while the tax brackets have shifted, the first $24,000 that a family earns, or the first $12,000 that an individual earns, will be free from the federal income tax."
However, Rep. Ed Perlmutter, D-Arvada, warned that the tax reform proposal carries hidden risks for the overall economy.
"President Trump's tax plan continues to be short on details but is not short on giveaways for corporate interests and the wealthiest Americans," Perlmutter said. "What we do know from the plan released today is that corporations will pay a substantially lower tax rate and new loopholes will be created for the wealthy, all while exploding the deficit."
The plan recommends eliminating many tax breaks but does not specify all of them that should be cut. Instead, it leaves the decision to congressional tax-writing committees.
The plan would eliminate the alternative minimum tax and the estate tax, which is imposed on inherited earnings. It also would get rid of most itemized deductions, including the ones commonly used for state and local tax expenses.
In addition to keeping the mortgage interest and charitable donation deductions, the plan would continue tax incentives for education and retirement savings.
Gregory Golyansky, past president of the Colorado Union of Taxpayers, warned about government "social engineering" from tax breaks.
He defined social engineering as government use of the tax code to encourage some behaviors but discourage others.
"You either increase taxes for everybody or you reduce taxes for everybody," Golyansky said. "We don't normally believe in the government engaging in this social engineering through the tax system. Free markets should be the only factor to consider there."
Other than questions about tax breaks, he said Trump's tax reform proposal is likely to bring economic benefits.
The Colorado Union of Taxpayers is a nonpartisan group that advocates for what it believes is good tax policy.
Jimmy Sengenberger, president of the Denver-based public policy group Millennial Policy Center, welcomed the tax reform proposal as a way of lowering the tax burden on Americans.
"While there are changes that should be made and additional elements to be included, on the whole the Unified Framework offers a great starting point for meaningful tax reform that will unleash the American people, make the United States more competitive and launch us on the trajectory toward more than 3 percent economic growth," Sengenberger said.
Although not mentioning the Trump plan by name, the Colorado for Tax Reform Coalition, a group of business leaders, in a statement seemed generally supportive: "Our nation's tax system is in urgent need of reform to boost economic growth, increase global competitiveness for American companies, and bring about meaningful improvements in the incomes of American families through higher wages and more American jobs."