House GOP scrambles to finalize tax bill
WASHINGTON (AP) — House Republicans on Wednesday scrambled to finalize the first major tax overhaul in three decades amid opposition from GOP lawmakers fearful about constituents losing a cherished deduction for state and local taxes.
Top Republicans vowed to release the measure on Thursday after missing a self-imposed Wednesday deadline and dismissed rumors that the unveiling might be further delayed. The ambitious timetable calls for passing the measure in the House by Thanksgiving.
“Failure is not an option,” said Rep. Chris Collins, R-N.Y.
The emerging plan would retain the income tax rate for the wealthiest earners. But for that highest bracket, the tax writers were considering raising the minimum level of income to $1 million from the current $470,000 — a change that would reduce tax revenue.
The plan also would sharply cut tax rates for businesses in hopes of improving U.S. economic competitiveness. Tax rates for individuals would be trimmed as well.
President Donald Trump weighed in Wednesday on Twitter: “Wouldn’t it be great to Repeal the very unfair and unpopular Individual Mandate in ObamaCare and use those savings for further Tax Cuts for the Middle Class. The House and Senate should consider ASAP as the process of final approval moves along. Push Biggest Tax Cuts EVER.”
The idea of repealing the individual mandate has been pushed by Republican Sen. Tom Cotton of Arkansas, but was dismissed by key GOP leaders since it would add political complications to an already difficult task of crafting a tax bill that can pass the House and Senate.
“I think tax reform is complicated enough without adding another layer of complexity,” said No. 2 Senate Republican John Cornyn of Texas.
Tax writers decided to maintain the highest personal income tax rate at its current 39.6 percent and to slash the top tax rate for corporations to 20 percent from 35 percent. They strained to complete other last-minute changes, but failed to finalize details to meet their Wednesday deadline.
A key reason was continuing opposition from GOP lawmakers from New York and New Jersey, many of whom are opposed to repealing a lucrative deduction for state and local taxes that benefits their states more than other.
“I view the elimination of the deduction as a geographic redistribution of wealth picking winners and losers,” said Rep. Lee Zeldin, R-N.Y., who represents eastern Long Island. “I don’t want my home state to be a loser, and that really shouldn’t come as any surprise.”
The lawmakers were haggling over a possible cap to the deduction for local property taxes. Ways and Means Committee Chairman Kevin Brady, R-Texas, had offered as a concession keeping the property tax deduction for a homeowner’s federal tax bill, though the amount of the deduction that could be taken may be limited.
The ability to deduct state and local income taxes on federal returns, on the other hand, would be ended. The proposed change means there would be three itemized deductions retained: for home mortgage interest, charitable donations and local property taxes.
Talks on the issue seemed to have broken off for now as Brady and other key Republicans scrambled to find offsetting tax revenues to help finance rate cuts.
The plan outline released last month by Trump and Republican leaders in Congress called for shrinking the number of tax brackets from seven to three or four, with respective tax rates of 12 percent, 25 percent, 35 percent and to be determined. The tax system would be simplified, and most people would be able to file their returns on a postcard-sized form.
The plan calls for nearly doubling the standard deduction used by most average Americans to $12,000 for individuals and $24,000 for families, and increasing the per-child tax credit. In addition to slashing the corporate tax rate, it also seeks to repeal inheritance taxes on multimillion-dollar estates, a big break for the wealthy.