HOUSE TAX BILL TARGETS DEDUCTIONS, WRITE-OFFS Trump calls it a gift for families as Dems see boon for wealthy
WASHINGTON — House Republicans released a sweeping tax overhaul Thursday that would limit or end many of the most popular tools used to minimize how much Americans owe, including lowering the cap on mortgage interest deductions and eliminating write-offs of state income taxes.
The much-anticipated rollout launches a grueling legislative process that will test GOP unity in the coming weeks as the party struggles to deliver one of President Donald Trump’s top priorities.
The plan would immediately slash the corporate tax rate to 20 percent from 35 percent and streamline individual rates from seven brackets into four.
In addition to ending write-offs of state and local income taxes, mortgage interest deductions would be limited to new loans of no more than $500,000, down from the current $1 million. Deductions for second homes would no longer be allowed. Property tax deductions would be capped at $10,000.
Popular 401(k) retirement savings plans used by many Americans were untouched by the bill, despite some efforts to restrict those tax- deferred accounts in a effort to pay for cuts elsewhere.
House Speaker Paul Ryan, R-Wis., said the plan would save the average American family $1,182 a year.
Trump praised it as a “massive tax cut for American families” that will lead to the creation of more jobs. He wants Congress to pass the legislation by year end.
“We’re working to give the American people a giant tax cut for Christmas,” Trump said at the White House.
Critics say the 429-page bill, the Tax Cuts and Jobs Act, is skewed heavily toward businesses and the wealthy.
“What we are seeing today is a plan that exacerbates the unfairness and inequality in our tax code,” said Senate Minority Leader Chuck Schumer, D- N.Y. “The Republican tax plan would put two thumbs down on a scale already tipped towards the wealthy and powerful. ... Surely we can do better.”
“If you’re the wealthiest 1 percent, Republicans will give you the sun, the moon and the stars, all of that at the expense of the great middle class,” said House Minority Leader Nancy Pelosi, D-Calif.
The plan increases the standard deduction for taxpayers who don’t itemize from $6,350 to $12,000 for individuals, and from $12,700 to $24,000 for couples. But it also eliminates the $4,050 per-person personal exemptions that currently help many taxpayers further lower their bills.
It creates four new tax brackets. For married couples, income from $0 to $90,000 will be taxed at 12 percent, income from $90,000 to $260,000 will be taxed at 25 percent, income from $260,000 to $1 million will be taxed at 35 percent, and income above that is taxed at the current top rate of 39.6 percent.
For individuals, income up to $45,000 will be taxed at 12 percent, income from $45,000 to $200,000 will be taxed at 25 percent, income from $200,000 to $500,000 will be taxed at 35 percent, and income above $500,000 at the current top rate of 39.6 percent.
Overall, the plan would add $1.5 trillion to the deficit over 10 years, according to the congressional Joint Committee on Taxation. Total tax cuts for individuals would reduce federal revenue by $929 billion over the decade, the com- mittee said. Business cuts domestically would lower federal revenue by $847 billion.
Republicans insist the economic growth created by the plan will eventually offset any short-term costs.
Republicans worked on the package in secret, blocking Democratic input, and outside groups gave only tepid support.
Some Republicans from high-tax states expressed opposition to the measure’s elimination of the deduction for state and local income taxes. Senate Finance Committee Chairman Orrin Hatch of Utah called the House measure “a great starting point” but said it would be “somewhat miraculous” if its corporate tax rate reduction to 20 percent — a major Trump goal — survived. His panel plans to produce its own tax package.
Some leading groups, including the National Association of Home Builders and National Federation of Independent Businesses, have already come out against the plan, complaining it hurts their industries or does not go far enough toward reducing taxes.
The change in mortgage interest deductions would apply only to home purchases and mortgages made after Nov. 2.
The bill increases the existing $1,000 per child tax credit to $1,600 and adds a new family tax credit of $300 for dependents who are not children, such as elderly relatives.
Other popular deductions would be repealed, including alimony payments, adoptions, dependent care programs, medical savings accounts and moving expenses.
Education-related deductions — for student loan interest and employerbacked tuition assistance — would also end. Charitable giving would be adjusted, with new limits on deducting costs of sports tickets.