House GOP scrambles to finalize tax overhaul
WASHINGTON — House Republicans on Wednesday scrambled to finalize the first major tax overhaul in three decades amid opposition from GOP lawmakers fearful about constituents losing a cherished deduction for state and local taxes.
Top Republicans vowed to release the measure Thursday after missing a self-imposed Wednesday deadline and dismissed rumors that the unveiling might be further delayed. The ambitious timetable calls for passing the measure in the House by Thanksgiving.
“Failure is not an option,” said Rep. Chris Collins, RN.Y.
The emerging plan would retain the income tax rate for the wealthiest earners. But for that highest bracket, the tax writers were considering raising the minimum level of income to $1 million from the current $470,000 — a change that would reduce tax revenue.
The plan also would sharply cut tax rates for businesses in hopes of improving U.S. economic competitiveness. Tax rates for i ndividuals would be trimmed as well.
President Donald Trump weighed in Wednesday on Twitter: “Wouldn’t it be great to Repeal the very unfair and unpopular Individual Mandate in ObamaCare and use those savings for further Tax Cuts for the Middle Class. The House and Senate should consider ASAP as the process of final approval moves along. Push Biggest Tax Cuts EVER.”
The idea of repealing the individual mandate has been pushed by Republican Sen. Tom Cotton of Arkansas, but was dismissed by key GOP leaders since it Treasury Secretary Steve Mnuchin listens as President Donald Trump speaks on tax policy with business leaders. would add political complications to an already difficult task of crafting a tax bill that can pass the House and Senate.
“I think tax reform is complicated enough without adding another layer of complexity,” said No. 2 Senate Republican John Cornyn of Texas.
The plan drew immediate criticism from Democrats, who complained it was too favorable to business and the wealthy and contradicted Trump’s rhetoric of bringing relief and economic benefit to the stressed middle class.
Tax writers decided to maintain the highest personal income tax rate at its current 39.6 percent and to slash the top tax rate for corporations to 20 percent from 35 percent. They strained to complete other last-minute changes, but failed to finalize details to meet their Wednesday deadline.
A key reason was continuing opposition from GOP lawmakers from New York and New Jersey, many of whom are opposed to repealing a lucrative deduction for state and local taxes that benefits their states more than others.
“I view the elimination of the deduction as a geographic redistribution of wealth picking winners and losers,” said Rep. Lee Zeldin, R-N.Y., who represents eastern Long Island. “I don’t want my home state to be a loser, and that really shouldn’t come as any surprise.”
The lawmakers were haggling over a possible cap to the deduction for local property taxes. Ways and Means Committee Chairman Kevin Brady, R-Texas, had offered keeping the property tax deduction for a homeowner’s federal tax bill as a concession, though the amount of the deduction that could be taken may be limited.
The ability to deduct state and local income taxes on federal returns, on the other hand, would be ended. The proposed change means there would be three itemized deductions retained: for home mortgage interest, charitable donations and local property taxes.
Talks on the issue seemed to have broken off for nowas Brady and other key Republicans scrambled to find offsetting tax revenue to help finance cuts.
A controversy over reducing the amount of money people can contribute tax-free into 401(k) retirements accounts continues to swirl, as lawmakers like Brady are tempted to trim the benefit to generate additional revenue in the near term. Trump has weighed in against the idea.