Key vote paves way for Trump’s tax cuts

THE US House of Representatives helped pave the way yesterday for deep tax cuts sought by President Donald Trump and Republican leaders, but barely overcame a revolt within party ranks that could foreshadow trouble ahead.

The Republican-controlled House voted 216-212 to pass a budget blueprint for the 2018 fiscal year. The measure will enable the tax legislation, due to be introduced next week, to pass the 100-seat Senate with a simple majority rather than a 60-vote super-majority, hard to reach given Democrats’ opposition. Republicans hold a slim 52-48 margin in the Senate.

But House Republican leaders came within two votes of failure. Democrats were unified in their opposition, and 20 Republicans voted against the bill, many expressing disapproval of a provision that would repeal an income tax deduction for state and local taxes.

Discord is also looming over a potential provision to scale back a popular tax-deferred US retirement savings programme known as a 401(k). Both those provisions are aimed at offsetting revenue losses that would result from the planned sweeping tax cuts, particularly for companies.

Eliminating the retirement savings deduction would hit middle-class voters in high-tax states like California, New York, Illinois, Pennsylvania and New Jersey.

Democrats have called the tax plan a giveaway to the rich and corporations that would swell the federal deficit.

Republicans are traditionally opposed to letting the deficit grow. But in a stark reversal of that stance, the party’s budget resolution, previously passed by the Senate, called for adding up to $1.5tn (€1.29tn) to federal deficits over the next decade to pay for the tax cuts.

Several conservative Republicans voted against it because of deficit concerns. One of them, Representative Justin Amash, wrote on Twitter, “What happened to fiscal conservatism?”

The outline of the Republican plan announced last month would cut the corporate tax rate to 20pc from 35pc, the small business rate to 25pc from up to 39.6pc and the top individual rate to 35pc from 39.6pc.

Even though his fellow Republicans control both the House and Senate, the president has been unable to secure passage of major legislation, having failed to repeal the Obamacare law.

“Big News - Budget just passed!” Trump wrote on Twitter.