Hard choices loom in quest for lower taxes
GOP’s opening gambit focuses on cuts, not how to control deficits
WASHINGTON — Republican leaders on Wednesday proposed slashing tax rates for the wealthy, the middle class and businesses while preserving popular tax deductions that encourage buying homes and giving to charity, hoping to unify the party behind a proposal to revamp the U.S. tax code.
But the nine-page framework they released to start negotiations left many key questions unanswered, including how they plan to avoid adding trillions of dollars to the government’s debt. The framework leans heavily on limiting taxes paid by the wealthiest Americans, such as the alternative minimum tax, and opposition to these changes from Democrats suggest it will be a battleground as negotiations intensify.
Republicans were also careful not to identify
numerous tax breaks they might remove, focusing instead on promises to lower rates so much that President Donald Trump estimated the effort would amount to the biggest tax cut of all time.
The “unified framework” was meant to serve as a starting point for negotiations on a tax deal, which lawmakers hope to complete by the end of the year. Republican leaders are now tasked with resolving controversial questions to unite their party — and possibly some Democrats — behind tax legislation, such as what corporate tax breaks to protect and how much revenue they are willing to lose in pursuit of new economic growth.
Trump has made rewriting the tax code a major part of his domestic agenda, and on Wednesday he urged his party on.
“This is a once-in-a-generation opportunity, and I guess it’s probably something you could say I’m very good at,” Trump said in Indiana. “I’ve been waiting for this for a long time.”
The Committee for a Responsible Federal Budget estimated that the nine-page framework would equate to a $2.2 trillion tax cut, with $5.8 trillion lost to lower rates and other changes, and another $3.6 trillion recouped by eliminating deductions.
There were few initial estimates of what the tax framework might mean for economic growth, an area that will probably divide Republicans supportive of the plan and Democrats who immediately complained that the changes would disproportionately benefit the wealthy.
The White House and GOP leaders negotiated for months and agreed in large part only on the taxes they want to cut. They now face the more arduous task of agreeing on which tax deductions to take away, a process sure to pit party members against each other and put them under extreme pressure from outside lobbying groups fighting to protect their favored tax breaks.
“I hope that people will have the intestinal fortitude it’s going to take to do it right,” Sen. Bob Corker, R-Tenn., said late Tuesday. “People say the health care was hard — you have no idea. You have no idea how this is going to be.”
In Indiana, Trump threatened to try to oust Democrats who don’t vote to turn the tax cuts into law. He singled out Sen. Joe Donnelly of Indiana, who is up for re-election next year, as a Democrat who would be targeted if he didn’t support the GOP plan.
“We will come here, we will campaign against him like you wouldn’t believe,” Trump said.
Democratic leaders will try to keep their party united in opposition, and on Wednesday they charged the GOP with proposing a huge tax cut for the wealthy but offering little for anyone else.
They said there was little evidence the tax plan would provide any tax relief for low-income Americans, and it couldn’t be learned how much the middle class would benefit, either. Republicans didn’t specify what tax rates would apply to certain income levels, making it also hard to determine the framework’s impact.
“Republicans’ tax framework is not tax reform,” said House Minority Leader Nancy Pelosi, D-Calif. “It is a framework that gives away the store to the wealthiest while sticking the middle class with the bill.”
Proposals include cutting the corporate tax rate from 35 percent to 20 percent and making it much easier for multinational companies to bring money earned overseas into the United States.
They also propose collapsing the seven individual income tax brackets into three and allowing more people to qualify for the child tax credit, designed to help low-income working families.
The framework would roughly double the standard deduction that married families and individuals use to reduce their taxable income, a change that Republicans hope would simplify the filing system.
Republicans also are holding out the possibility of imposing a new, higher tax rate on the wealthy to ensure that the tax changes do not disadvantage the middle class, though the White House and GOP leaders have not agreed on how that would work.
Many of the tax changes would benefit upper-income Americans, including eliminating the estate tax and the alternative minimum tax.