Donald Trump announced an increase in the individual tax rates in his tax reform plan on Monday, a major concession to the budget realities facing the Republican presidential candidate.
The new top rate on ordinary income is 33 percent in a revised version of the plan, Trump said Monday in a speech on the economy in Detroit. Previously, Trump's campaign had said it would be 25 percent.
At 33 percent, the top rate in Trump's plan would be higher than those suggested by former Florida Gov. Jeb Bush, Sen. Ted Cruz, Sen. Rand Paul and other Republicans who Trump defeated in the primary. It would align with the tax reform plan introduced in June by House Republicans under Speaker Paul Ryan.
Trump also indicated that he would raise the two other tax brackets in his proposal to match those suggested by the House Republicans: The 10 percent bottom bracket would rise to 12 percent, and the middle bracket would go up from 20 percent to 25 percent.
Trump's plan initially was estimated by several outside groups to cost the federal government about $10 trillion over 10 years. CNBC host Larry Kudlow, Heritage Foundation scholar Stephen Moore, and other outside advisers have been working with the campaign to change the plan partly to lower that projected cost.
While a higher individual income tax rate would entail lower revenue losses for the government, it also represents a step away from the bet that lower tax rates would spur greater economic activity.
Another major update to Trump's plans revealed Monday is that he would allow companies to immediately expense new investments, a policy that conservatives have pushed in recent years. Today, businesses are required to expense investments over the course of years, based on a complicated system of estimated depreciation for assets.
Trump said that further details on the changes would be coming in the days ahead. He said his plan would represent "the biggest tax revolution since the Reagan tax reform."
Speaking on CNBC Monday before the speech, Kudlow said the changes would be a "re-affirmation" of a pro-growth, supply-side vision for the government.
Kudlow added that the 15 percent tax rate on business income would not be changed in the new version of the Trump tax plan.