What's in the Latest Tax Reform Package?

The GOP recently released a "framework" for tax reform legislation. The document spells out the party's top priorities for tax reform and offers several big clues about how the new tax system would work. Here are some of the highlights relating to individual (as opposed to business) tax reform.

The existing tax system has seven individual tax brackets ranging from 10% to 39.6%. These tax brackets are "marginal," meaning that if you make enough income to hit a certain bracket, you aren't charged that rate on all your income -- just the part of it that falls withing that bracket. For example, a single person making $30,000 per year would be in the 15% tax bracket, but he would charged a 10% tax rate on the first $9,325 that he made and a 15% tax rate on his remaining $20,675 in income.

The proposed tax system continues to use marginal brackets, but it cuts the number of brackets from seven to three: 12%, 25%, and 35%. The document suggests there may be an "additional top rate" for the highest-income taxpayers, but it doesn't give any further details. It also mentions using a "more accurate" means of tying the three tax brackets to inflation, but again it's short on specifics.

Source: Fool.com