The most fleshed-out version of the Republican tax plan is expected on Wednesday, with clearer details on proposed changes in tax rates for corporations and individuals.
While President Donald Trump has called the plan the “biggest tax cut in history,” early indications suggest that, at least on the surface, rates could increase for one group.
According to reports, the rate for the bottom tax bracket for individuals would increase to 12% from 10% under the plan. At the same time, however, the standard deduction would double.
Currently, a person paying the 10% tax rate makes between $0 and $9,325 annually and takes a standard deduction of $6,350. That means people making $6,351 to $9,325 would pay the 10% rate excluding any other deductions.
But under Trump’s plan, while a person making $9,325 or less would be bumped up to the 12% tax bracket, the standard deduction would be $12,700, meaning they wouldn’t see their effective tax rate increase. In fact, many more people would end up paying nothing in taxes.
Put another way, looking at this provision alone, the poorest Americans would see their tax rate go up, but no one would end up paying more per year in taxes.
The reports help to explain a seemingly puzzling quote from Trump on Sunday regarding the tax plan.
“We’re going to bring the individual rate to 10% or 12%, much lower than it is now,” Trump told reporters outside of Air Force One.
A White House representative told Business Insider that Trump was referring to the lowest income tax rate.
“It’s important to note that by increasing the standard deduction (as was on the one-pager we released in April) we’re effectively increasing the size of the 0% tax bracket, so that the hardworking American at the bottom of the economic ladder is empowered to climb their way up,” the representative said.
In addition to the slight uptick for the lowest tax bracket, the Republican plan is expected to propose lowering the top individual tax rate to 35% from 39.6%.