US Republican tax plans gain speed; Fitch warns on deficit

WASHINGTON: Republicans in the US House of Representatives forged ahead with legislation to reshape the federal tax code, while a top credit-ratings agency said the bill would balloon the budget deficit and give only a temporary boost to the economy.

As the House tax committee weighed amendments to a bill that Democrats have blasted as a give-away to corporations and the rich, the Washington tax reform debate was fast shifting to the Senate, where Republicans hold only a slim majority.

Senate Republicans are expected to unveil their own tax bill at the end of the week, and early indications suggest it could differ significantly from the House legislation.

The House is aiming to vote on its bill next week, a senior Republican said.

Tax reform has been a priority for President Donald Trump, who says it will stimulate economic growth.

But Republicans have yet to score a major legislative accomplishment since Trump took office in January, even though the party controls both chambers of Congress as well as the White House.

Trump made another pitch for Democratic support on Capitol Hill, where his top aides met with about a dozen Senate Democrats and Trump himself phoned in from his Asia trip.

“He said, ‘Look – I want to do it in a bipartisan way,’” Senator Joe Donnelly told reporters.

Fitch Ratings predicted that a Republican tax plan would win passage in both chambers, but did not see it offering long-term benefits.

“Such reform would deliver a modest and temporary spur to growth.... However, it will lead to wider fiscal deficits and add significantly to US government debt,” Fitch said, revising up its medium-term US government debt forecast.

The US national debt now exceeds US$ 20 trillion.

Republicans once firmly opposed adding to the debt, but their emphasis has changed.

Congress’ Joint Committee on Taxation (JCT) said the House bill would add nearly US$ 1.5 trillion to the national debt from 2018 through 2027.

Trump and congressional Republicans say the proposed tax cuts would boost economic growth enough to generate new revenues that would offset the tax cuts. Few economists agree. The House bill slashes tax rates for large corporations, small businesses and wealthy Americans, while sharply reducing or eliminating tax breaks that benefit many middle- class Americans such as deductions for state and local taxes, college tuition and home mortgage interest.

JCT estimates that the House bill could raise taxes on as many as 38 million people who earn between US$ 20,000 and US$ 40,000 per year, beginning in 2023.

House Republicans, who have an overwhelming majority, drafted their bill in secret, ignoring Democrats. — Reuters