President Donald Trump speaks during a cabinet meeting at the White House. Photo / AP
President Donald Trump speaks during a cabinet meeting at the White House. Photo / AP
US President Donald Trump has scored a major win, with the US congress passing sweeping tax cuts just in time for Christmas.
The successful passage of the US$1.5 trillion (NZ$2.2t) tax code reforms is Mr Trump's first significant legislative achievement since he came to office, after efforts to repeal and replace Barack Obama's healthcare scheme failed.
Republicans say the cuts will benefit middle-class families and businesses, but their Democratic rivals argue the benefits will mostly flow to the rich.
Secretary of State Rex Tillerson, left, and Secretary of Defense Jim Mattis, right, listen as President Donald Trump speaks during a cabinet meeting at the White House. Photo / AP
Republican speaker Paul Ryan said the average American family of four earning $73,000 ($NZ104,450) would be $2059 (NZ$2947) better off next year as a result of the reforms.
"Today, we are giving the people of this country their money back," he said on Tuesday. "This is their money after all."
A new analysis by the Tax Policy Centre found that all income groups would pay less tax under the plan. The average American would pay about $1600 (NZ$2290) less tax in 2018 and their after-tax income would increase by 2.2 per cent on average. However, the analysis also found that the largest cuts as a share of income would go to taxpayers in the 95th to 99th percentiles — that is, the richest Americans.
While the passage of the cuts is a coup for the President, he faces a tough task of selling the benefits of the reforms to the public.
A poll published by CNN this week found that 55 per cent of Americans opposed the bill and only 33 per cent were in favour. A separate Wall Street Journal-NBC News poll found more than two-thirds of respondents believed the law would mostly help corporations and the wealthy.
The Tax Policy Centre analysis backs up this view. Middle-income earners, earning between $49,000 and $86,000 ($A64,000-$A123,000), are expected to pay about $900 ($A1175) less tax next year on average, while high-income earners, earning between $308,000 and $733,000 (NZ$440,950-NZ$104,900) will pay $13,500 (NZ$19,300) less. The top 1 per cent who make more than $733,000 (NZ$1,050,400) will receive an average tax cut of $51,000 (NZ$73,000).
Meanwhile, 63 per cent of those surveyed in the CNN poll believe Mr Trump and his family would be better off under the reforms.
The poll also found that Mr Trump's approval rating had sunk to a historic low of 35 per cent, the worst performance for any modern president at this point in their term.
It will be interesting to see whether these results change in February when Americans begin to receive extra dollars in their pay packet as a result of the cuts.
US businesses are among the biggest winners under the new plan, with the corporate tax rate to be cut from 35 per cent to 21 per cent. Mr Trump argues the cuts will make American businesses more competitive globally, encourage more companies to do business in the US and, ultimately, generate new jobs for Americans.
Speaker of the House Paul Ryan, R-Wis., joined at right by House Ways and Means Committee Chairman Kevin Brady, R-Texas, meets reporters just after passing the Republican tax reform bill. Photo / AP
While the White House said it was focused on giving tax relief to the middle class, the reforms also give a sizeable handout to the wealthiest, with the top individual tax rate cut from 39.6 per cent to 37 per cent.
While the corporate tax cuts are permanent, the personal cuts will expire in 2026. Mr Ryan said the Republicans intended to make them permanent later on, but it's not clear whether they will still control the House and Senate when that time comes.
The measures will add $1.456t (NZ$2.08t) to the national debt over the next decade, but the Republicans are hoping the stimulatory effects of handing dollars back to businesses and citizens will lead to significant growth.
Mr Ryan said the reforms were a "profound change".
"This is one of the most important pieces of legislation that congress has passed in decades to help the American worker, to help grow the American economy," he said.
"For all those millions of men and women in America who are living pay cheque to pay cheque, who are struggling to get ahead, help is on the way.
"For all those businesses that are tied with one hand behind their back in this global economy having a hard time competing, help is on the way.
"This is a good day for America, this is a good day for workers, this is a great day for growth."
White House spokeswoman Sarah Huckabee Sanders said the President was "making good on his promise to deliver tax cuts for Christmas" and she said helping out the middle class was "priority number one".
Mr Trump has said repeatedly that the bill represented the biggest tax cut in history, but Ronald Regan's 1981 program was larger, according to The Wall Street Journal.
The United States Senate just passed the biggest in history Tax Cut and Reform Bill. Terrible Individual Mandate (ObamaCare)Repealed. Goes to the House tomorrow morning for final vote. If approved, there will be a News Conference at The White House at approximately 1:00 P.M.
The Tax Cuts are so large and so meaningful, and yet the Fake News is working overtime to follow the lead of their friends, the defeated Dems, and only demean. This is truly a case where the results will speak for themselves, starting very soon. Jobs, Jobs, Jobs!
"This GOP tax scam is simply theft — monumental brazen theft — from the American middle class," she said, referring to the Republicans by their nickname of the Grand Old Party.
The tax rewrite, the biggest the US has seen since 1986, passed the House on Wednesday afternoon after a procedural hiccup meant it needed to be voted on twice. The Senate passed the bill 51-48 early Wednesday morning.
Mr Trump is expected to sign the bill before Christmas.
