What we know (and don't) about Trump's tax reform plan

PHOTO: President Donald Trump talks about the health care overhaul bill, March 24, 2017, in the Oval Office of the White House in Washington. PlayPablo Martinez Monsivais/AP Photo
WATCH How Donald Trump's Tax Plan Could Impact Your Wallet

After President Trump's bid to repeal and replace Obamacare -- a hallmark campaign promise -- flopped in the U.S. House last week, Republicans will look to tax reform in an attempt to deliver the first major legislative accomplishment of the GOP government, which controls both houses of Congress and the presidency.

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Trump has long promised a simpler tax code with lower tax rates for corporations and tariffs on companies who move outside the United States. “We’ll probably be going right now for tax reform,” Trump said in the Oval Office after Speaker Paul Ryan pulled the bill from the floor.

Here's what we know and don't know about the potential tax reform efforts:

What Trump has promised on tax reform

Trump's plan, revealed during the campaign, centers around nixing income taxes for individuals making less than $25,000 a year or for couples making less than $50,000 per year. "They get a new one page form to send the IRS saying, 'I win,'" says Trump's tax reform plan from the campaign. "The Trump plan eliminates the income tax for over 73 million households."

"All other Americans will get a simpler tax code with four brackets – 0%, 10%, 20% and 25% – instead of the current seven," the plan states, adding that the higher brackets would have fewer options for deductions. "Simplifying the tax code and cutting every American’s taxes will boost consumer spending, encourage savings and investment, and maximize economic growth."

For single filers under Trump's plan, those earning $150,001 and up would pay the top rate of 25 percent as well as 20 percent on capital gains. Tax brackets for 2016 range from 10 percent for single people making less than $9,275 to 39.6 percent for single filers making $415,050 or more.

The president has also pledged to eliminate the Alternative Minimum tax, which affects high-income Americans who take lots of deductions. Tax returns from 2005 showed Trump paid most of his taxes that year because of the AMT.

Trump's plan also says businesses should expect their taxes to go down. "No business of any size, from a Fortune 500 to a mom and pop shop to a freelancer living job to job, will pay more than 15% of their business income in taxes," says Trump's tax reform plan.

The federal corporate tax rate ranges from 15-35 percent, according to the Government Accountability Office.

"These lower rates will provide a tremendous stimulus for the economy – significant GDP growth, a huge number of new jobs and an increase in after-tax wages for workers," the Trump plan states. Trump has routinely said that American corporate tax rates are prompting many businesses to grow overseas and ship their goods into the United States.

Despite the loss of revenue from both of these tenets of the bill, Trump's plan the bill will be "fully paid for" and "fiscally responsible." One of the main drivers would be a border adjustment tax -- a tariff on goods imported into the United States from other countries. "I think another point that's important to the president is a potential border tax -- that we start evening up the playing field between our country, countries around the world," said White House chief of staff Reince Priebus on Fox News.

The plan also calls for "a one-time deemed repatriation of corporate cash held overseas at a significantly discounted 10% tax rate" and "reducing or eliminating deductions and loopholes available to the very rich."

What the Freedom Caucus is saying

In order to pass comprehensive tax reform, Trump and Ryan will likely need to win the support of the most conservative wing of the Republican Party, dubbed the "Freedom Caucus." This group of holdout Republicans refused to support the AHCA.

"I think there has been a lot of flexibility in terms of some of my contacts and conservatives in terms of not making it totally offset," said Rep. Mark Meadows, the leader of the Freedom Caucus on ABC News' "This Week." "Tax reform and lowering taxes, you know, will create and generate more income. And so we're looking at those, where the fine balance is. But does it have to be fully offset? My personal response is no."

"We haven't taken any official position on the border adjustment tax. We'll be talking not only to the speaker on that," said Meadows. "But we'll be talking to the administration, as well, on what they want to see. I know they have some specific ideas. And as we look to tax reform, the big debate will be over that border adjustment tax. But we're in the information-gathering mode right now."

Meadows had previously expressed his support for passing a bill without a border adjustment tax. "Let's go ahead and pass one without border adjustment, assuming that we can lower corporate [taxes] to 20 percent, flatten the rate out for individuals," he told Axios. "We're just saying alright, let's go ahead and advance tax reform on its own individual merits without the pay-for with the border adjustment tax. I believe we can pass it in the House, and we might even be able to pass it in the Senate."

What Democrats are saying

Democrats have made it clear that they are not on board with lowering taxes on high-income Americans and big businesses, accusing Trump and the Republicans of being in the pockets of special interests.

"The president campaigned as a populist against the Democratic and Republican establishments. But he's been captured by the hard right wealthy special interests," Senate Minority Leader Chuck Schumer told ABC News' George Stephanopoulos on "This Week" on Sunday. "If they do the same thing on tax reform, and the overwhelming majority of the cuts go to the very wealthy, the special interests, corporate America, and the middle class and poor people are left out, they'll lose again."

"If he aims a proposal aimed at the middle class and the poor people, doesn't give breaks to the rich ... we could work with them. But I don't think they're headed in that direction," Schumer continued. "If they want to actually spend some money, Meadows would be vehemently opposed and he'd have to break with the hard right and his caucus, we'll talk to them for sure."

Still, Priebus said he was optimistic some Democrats would get on board. "I think that, moving forward, the president's vision of lowering taxes for every American is what's going to unite not just the Republican Party, but I think some of those Democrats are going to come on board as well," he said.

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