US House of Representatives approves tax cut plan

The US House of Representatives has approved its version of tax cut plan in an along-party-line vote and delivered a major legislative achievement.

The 227-205 vote on Thursday marked a key milestone for US President Donald Trump and his fellow Republicans, as they considered this legislative achievement as a major push for their quest to cut taxes for businesses and individuals, Xinhua news agency reported.

The House-version tax cut plan is estimated to bring $1.4 trillion to fiscal deficit over the next decade. Bipartisan studies showed that the benefits of the tax cuts would eventually go to the highest earners, while some middle-class households might pay higher taxes.

The tax plan consolidates individual tax brackets to four from seven and reduce the corporate tax rate from 35 per cent to 20 per cent, its lowest point since 1939.

It also eliminates a number of tax breaks and deductions, increases the child tax credit, abolishes the estate tax by 2025 and changes the US system for taxing multinational corporations.

"Passing this bill is the single biggest thing we can do to grow the economy, to restore opportunity, to help these middle-class families that are struggling," House Speaker Paul Ryan told lawmakers before the vote.

The White House argued that the corporate tax cut could boost US economy to increase by 3 per cent to 5 per cent in the long term, and American annual household income could increase by an average of $4,000.

According to the estimates by the think tank Tax Policy Center, the tax cut plan would reduce taxes on average for all income groups in 2018 and 2027. However, the largest cuts, in dollars and as a percentage of after-tax income, would accrue to higher-income households. 

All Democrats in the House chamber voted against the plan. They called the plan a giveaway to wealthy business owners and warned that it would drive the country deeper into debt.

The focus now turns to the Senate. The Senate is discussing its own version of tax cut plan and it's not clear whether the Republicans in Senate could secure enough votes to pass it.

Senate Republicans are aiming to vote on their tax plan during the week after the Thanksgiving holiday.

If the Senate passes its bill, the two chambers on the Hill will have to reach a final version of the legislation which needs to go through both chambers again.