The Big Six are scheduled to announce their tax reform framework sometime tomorrow. Previews of its content have been steadily leaking this week. Here is what we’ve heard so far:

  • Top corporate tax rate cut to 20% (down from 35%)
  • Pass-through business income (excluding income characterized as compensation) taxed at 25%
  • Full expensing (but only for five years)
  • Top individual tax rate cut to 35% (down from 39.6%) (maybe)
  • Individual rate brackets simplified to three brackets (maybe) set at 10%, 25% and 35%
  • The Framework may give Congress the flexibility to include a fourth individual bracket at 39.6%
  • Standard deduction doubled
  • Deductions for charitable giving and mortgage interest preserved
  • Deduction for state and local taxes eliminated
  • Estate tax repealed

Notably absent are rumors about international tax reform. However, it is still possible that the Big Six handoff to the tax writing committees will include some sort of deemed repatriation, coupled with a shift toward territoriality and/or the imposition of a foreign minimum tax.

Also notably absent are rumors on payfors other than the repeal of the deduction for state and local taxes. Representative Devin Nunes (R-CA) observed that we would be unlikely to get detail on payfors until there is a budget, which is consistent with the notion that the purpose of the framework is to build momentum for tax reform without attracting full-force opposition from adversely affected groups. Expect tomorrow’s framework to take the Goldilocks approach to detail – just enough to allow Congressional Republicans to add an appropriately-tailored set of instructions to the budget resolution, but not so much to trigger targeted opposition.

One thing that is clear is that we won’t see a fully baked tax bill for a while. As House Ways and Means Committee Chairman Kevin Brady (R-TX) stated on Monday: “Without a budget, there’s no tax reform — once that’s completed, Ways and Means will bring out the comprehensive bill . . . We will not be introducing a bill until the budget is passed.”