Republican leaders reach deal on tax package
Lawmakers hope to have bill ready for Trump to sign before Christmas break
WASHINGTON— Confident congressional Republicans forged an agreement Wednesday on a major overhaul of U.S. tax laws that would provide generous tax cuts for corporations and the wealthiest Americans — U.S. President Donald Trump among them — and deliver the first major legislative accomplishment to the GOP president.
Middle and low-income families would get smaller tax cuts, though Trump and GOP leaders have billed the package as a huge benefit for the middle class. The measure would scrap a major tax requirement of former president Barack Obama’s Affordable Care Act, a step toward the ultimate GOP goal of unravelling the law.
“The cynical voices that opposed tax cuts grow smaller and weaker, and the American people grow stronger,” Trump said at the White House. “This is for people of middle income, this is for companies that are going to create jobs. This is for very, very special people, the great people of America.”
The business tax cuts would be permanent, but reductions for individuals would expire after a decade — saving money to comply with Senate budget rules. In all, the bill would cut taxes by about $1.5 trillion (U.S.) over the next 10 years, adding billions to the nation’s mounting debt.
The legislation, which is still being finalized, would cut the top tax rate for the wealthy from 39.6 per cent to 37 per cent, slash the corporate income tax rate from 35 per cent to 21 per cent and allow homeowners to deduct interest only on the first $750,000 of a new mortgage.
The top tax rate currently applies to income above $470,000 for married couples, though lawmakers are reworking the tax brackets.
The standard deduction would be nearly doubled, to $24,000 for married couples.
Details of the agreement were described by Republican senators and congressional aides.
“It’s not my vision of perfect, but again, this is definitely going to be a strong pro-growth tax package,” Sen. Ron Johnson said.
Republicans see passage of the legislation as a political imperative, proving to voters they can govern as the GOP fights to hold onto its majorities in the House and Senate. Republicans said they expect the package to increase economic growth, generating additional tax revenue and lessening the hit to the budget deficit. Independent economists aren’t as optimistic.
Federal Reserve Chair Janet Yellen said she and her colleagues expect a “modest lift” to economic growth from the tax package.
Yellen said at a news conference the likelihood of lower taxes is why Fed officials expect the economy to grow at 2.5 per cent in 2018. But growth would then slip back closer to its recent 2-per-cent average.
Negotiators have removed several controversial provisions from the tax bill, including one that would have eliminated the deduction for interest on student loans and another deduction for medical expenses, said two congressional aides.
Business owners who report business income on their personal tax returns would be able to deduct 20 per cent of that income.
Senate leaders plan to vote on the package on Dec. 19. If it passes, the House would vote next. GOP leaders hope to send the bill to Trump before Christmas.
The measure has come under assault by Democrats who say it is unfairly tilted in favour of business and the wealthy. Top Senate Democrat Chuck Schumer said the public doesn’t know all the details of the bill, “but they smell what’s going on and that is tax cuts for the wealthiest and no help for so many in the middle class.”
The agreement was reached hours before a joint House-Senate conference committee met in public for the first time. The committee is charged with blending the tax bills passed by the House and Senate, though Republicans have done all of their negotiations behind closed doors.
Democrats have not been included in any substantive talks on the bill.
The full details will be unveiled by the end of the week, Brady said.
Once the plan is signed into law, workers could start seeing changes in the amount of taxes withheld from their paycheques early next year, lawmakers said — though taxpayers won’t file their 2018 returns until the following year.
Corporate tax cuts would take effect in January, allowing businesses to immediately write off the full cost of capital investments.