Republicans to propose maintaining top income tax bracket

Published on Tuesday, 31 October 2017 20:36

Associated Press

WASHINGTON - House Republican leaders are expected to unveil a tax proposal as soon as Wednesday that would maintain the 39.6 percent top personal income tax rate for wealthy individuals, amid criticism that their original plan was too friendly to the rich.

That's according to two people familiar with the plan who spoke on condition of anonymity in advance of the public release of the GOP bill. Under the plan being discussed, the top rate would apply to higher incomes, perhaps around $800,000 to $1 million, one of the people said. That person cautioned details remain in flux.

The plan originally unveiled by President Donald Trump and congressional Republicans called for shrinking the number of tax brackets from seven to three, with respective tax rates of 12 percent, 25 percent, 35 percent. That plan drew immediate criticism from Democrats, who complained it was too favorable to the wealthy and undermined Trump's rhetoric about it benefiting the middle class.

Republicans also plan to announce that they intend to reduce the corporate tax rate to 20 percent right away, erasing the recent chatter about phasing in the cut, according to a congressional official.

The head of the House tax-writing committee, Rep. Kevin Brady of Texas, did not answer directly when he was asked - while leaving House Speaker Paul Ryan's suite Tuesday - whether the drop would happen immediately. But, he said: “I want as much growth right from Day One as I can.”

Trump and congressional Republicans are seeking the first major tax overhaul in three decades, eager for a significant legislative achievement after being stymied in their attempts to repeal the Obama-era health care law. Enacting a tax package is seen as critical to helping Republicans maintain their majorities in the 2018 elections.

A day before the big reveal, Trump intensified his lobbying for the tax overhaul plan whose shape was still under negotiation by congressional Republicans. The president predicted a grand signing ceremony before Christmas at “the biggest tax event in the history of our country.”

“The process is complicated but the end result will not be that complicated. It's going to be: People are going to pay less tax by a lot, companies are going to pay less tax by a lot - that's a big difference - and companies are going to start rebuilding and they're going to stay here,” Trump said in the Roosevelt Room, where he was joined by the heads of more than a dozen business and trade allies.

Trump said he is directing Treasury Secretary Steve Mnuchin, White House economic adviser Gary Cohn and other administration officials to stay behind when he heads for Asia on Friday so they can help sell the tax proposal. The White House said Ivanka Trump, the president's daughter and adviser, had canceled plans to accompany the president to China and South Korea to help push the package.

The president said he was hopeful the House will approve the tax bill by Thanksgiving and that he can sign it into law by Christmas. But his overly optimistic timetable didn't address the concerns of lawmakers from states such as New York and New Jersey who have opposed a proposal to eliminate the federal deduction for state and local taxes, arguing it would hurt their constituents and subject them to being taxed twice.

One day before the plan was to be unveiled, legislators still were engaged in high-stakes negotiations over what deductions will stay and what will go.

Earlier in the day, Brady had hinted at the ongoing fluidity, telling reporters, “There's going to be a lot of speculation on different issues and different areas. Stay tuned; you'll know the details very soon.”

Even after the proposed legislation is put forward, Brady said, “We will continue in listening mode.”

Brady has said that taxpayers will be able to continue to deduct local property taxes on their federal returns but the deduction for state income taxes would be repealed. The change means there would be three itemized deductions retained: for home mortgage interest, charitable donations and local property taxes.

The National Association of Home Builders, meanwhile, has withdrawn its support for the plan because it does not believe it contains enough tax benefits for home owners.

Tom Donohue, president and CEO of the U.S. Chamber of Commerce, told Trump that the business groups would continue to “work on it. We're going to have some differences amongst the business community on what should be the takeaways and the adds.”

“I think your planning is really quite good: You're off to Asia and everybody else gets it worked out,” Donohue said to laughter.

GOP tax writers had considered phasing in the planned cut in the corporate tax rate, from 35 percent currently to 20 percent by 2022. The White House rebuffed that suggestion on Monday, and Trump reiterated his opposition on Tuesday. And a battle continues over contributions to 401(k) retirements accounts. The financial industry and some Republican lawmakers insist that the GOP plan not change the tax benefits of the popular savings vehicles, as has been floated by GOP leaders.

The current Republican 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.

Democrats, excluded from the closed-door work on the plan, continued to attack it. The Republicans “made a big deal about how they were going to double the standard deduction - that's $12 grand for a middle-class family,” Sen. Ron Wyden of Oregon, the top Democrat on the Senate Finance Committee, said in an interview. “But if you have four people in the family, or say five people in the family, and you get your 12 grand but you lose the personal and dependent-care exemptions - and then on top of it, you lose your state and local (tax deduction), that middle-class family is going to go in the hole.”

Posted in New Britain Herald, Nation-World on Tuesday, 31 October 2017 20:36. Updated: Tuesday, 31 October 2017 20:38.