Corporate rate will decline to 21%, while the top individual rate will decline to 37%.
The U.S. House & Senate Republicans have reached a deal on their large tax cut bill, increasing the chances that tax cuts will be signed into law by U.S. President Donald Trump before Christmas.
“I’m excited to announce that if Congress sends me a bill before Christmas, the IRS has just confirmed that Americans will see lower taxes and bigger paychecks beginning in February, just two short months from now,” said Trump.
“As a candidate, I promised we would pass a massive tax cut for the everyday, working Americans who are the backbone and heartbeat of our country,” added Trump. “Now, we are just days away from keeping that promise and delivering a truly amazing victory for American families.”
The Democrats have criticized the legislation, contending that it reduces taxes too much for large corporations and rich Americans, while providing much smaller benefits to middle class and working class people.
That said, it is expected that the average American family will save roughly $1,000 per year, and the cuts are predicted by many to increase the rate of growth, and potentially bring large amounts of money back into the United States as corporations face a better business environment – reducing the incentive to move overseas.
As noted by CNBC, “The latest proposal in Congress would involve dropping the corporate tax rate to 21 percent, the top individual tax rate to 37 percent and allowing a 20 percent pass-through deduction.”
Impact on Canada
The tax cut bill will have an impact on Canada, as our current corporate tax rate advantage will be lost. Additionally, the U.S. is moving in the direction of reducing red tape and cutting taxes, while many jurisdictions in Canada – including the federal government – are expanding regulations and imposing expensive carbon taxes.
This will severely weaken Canada’s competitive position.