Corporate tax rate also cut
WASHINGTON — A massive Republican tax package swiftly taking shape would pull down the top tax rate for wealthy Americans to 37 percent and slash the tax rate for corporations to a level slightly above what businesses and conservatives wanted.
Republicans in Congress rushed Tuesday toward a deal. Lawmakers and aides labored at a fevered pace to blend separate tax bills that were passed recently by the House and Senate. The Republican goal is to deliver to President Donald Trump the first major rewrite of the U.S. tax system in more than three decades.
GOP lawmakers hope to finalize blended legislation no later than Friday, vote next week and deliver the package of steep tax cuts for corporations and more modest cuts for families to the president before Christmas.
Trump was making a pitch Wednesday for the tax plan, which is unpopular with many. He will offer what aides called a “closing argument to the American people.” Trump planned to deliver the speech from the Grand Foyer, the entrance of the White House mansion, laying out how the tax changes would specifically benefit the middle-class families in attendance from Pennsylvania, Ohio, Virginia, Iowa and Washington state.
Trump was to note how the tax plan would save the families money, place them in lower tax brackets and help them pay for their children’s education, said the officials, who spoke on condition of anonymity ahead of the speech.
White House advisers said Trump will assert that the plan would deliver meaningful middle-income tax cuts and help young people benefit from a stronger economy.
The speech comes as the White House has sought to push back against polling suggesting the public views the plan as heavily tilted toward corporations and wealthy Americans. Trump has asserted that the plan will lower tax rates for individuals and spur job growth, helping American families.
The total amount of tax breaks in the legislation cannot exceed $1.5 trillion over the next decade, under budget rules adopted by the House and Senate. The legislation would add billions to the $20 trillion deficit.
Once the plan is signed into law, workers could start seeing changes in the amount of taxes withheld from their paychecks early next year, lawmakers said — though taxpayers won’t file their 2018 returns until the following year.
In a flurry of last-minute changes that could profoundly affect the finances of millions of Americans, House and Senate negotiators agreed to expand a deduction for state and local taxes to allow individuals to deduct income taxes as well as property taxes. The deduction is valuable to residents in high-tax states like New York, New Jersey and California.
Negotiators also agreed to set the corporate income tax rate at 21 percent, said two congressional aides who spoke on condition of anonymity because they were not authorized to publicly discuss private negotiations. Both the House bill and the Senate bill would have lowered the corporate rate from 35 percent to 20 percent.
Business and conservative groups lobbied hard for the 20 percent corporate rate. Negotiators agreed to bump it up to 21 percent to help offset revenue losses from other tax breaks, the aides said.
As the final parameters of the bill took shape, negotiators agreed to cut the top tax rate for individuals from 39.6 percent to 37 percent in a windfall for the richest Americans. The reduction is certain to provide ammunition for Democrats who complain that the tax package is a massive giveaway to corporations and the rich.
The top tax rate currently applies to income above $470,000 for married couples, though lawmakers are completely reworking the tax brackets.
Sen. Susan Collins, R-Maine, who has previously expressed opposition to reducing the rate for the wealthiest earners, acknowledged Tuesday that the negotiators appear to have agreed on the move. “I don’t think lowering the top rate is a good idea,” Collins said.
She didn’t threaten to vote against the final bill, however, if it included a lower rate, saying “I’m going to wait and look at the entire conference report and see what all the provisions are.”
Among the other tax breaks, negotiators agreed to eliminate the alternative minimum tax for corporations, a big sticking point for the business community, the aides said. They also agreed to let homeowners deduct interest on the first $750,000 of a new mortgage, down from the current limit of $1 million.
Both the House and Senate bills would scale back the deduction for state and local taxes, limiting it to $10,000 in property taxes. California Republicans have pushed to amend the bill to enable individuals to deduct state and local income taxes as well as property taxes. Rep. Pete Sessions, R-Texas, chairman of the House Rules Committee, said there is an agreement on how to address the issue, though he wasn’t specific.
The House bill would limit the mortgage interest deduction to the first $500,000 of a new mortgage, while the Senate bill would keep the current limit of $1 million. Two congressional aides said negotiators have agreed to split the difference.
The provision would not affect current mortgages.
The housing industry lobbied hard against changes to the deduction, arguing it would hurt home property values.
For corporations, the House-passed bill would eliminate the alternative minimum tax, but the Senate bill would retain it. The tax, currently levied on both corporations and wealthy individuals, is intended to ensure that they pay at least some tax.
Republican lawmakers in both the House and Senate said retaining the tax would limit the ability of corporations to take advantage of popular tax credits, including one for research and development.