Tax unity in GOP sought as Trump simmers
WASHINGTON — President Trump paid a rare visit to Capitol Hill on Tuesday to urge Republicans to pass a $1.5 trillion tax cut proposal by Christmas, as the party faces an array of unappetizing choices to pay for it.
Among the options: eliminate the deduction for state and local taxes that Californians and residents of other high-tax and predominantly Democratic jurisdictions rely on to hold down their tax bills.
Sen. Dianne Feinstein, DCalif., called the state and local tax deduction “a huge thing for California,” adding that the GOP plan is likely to add enormous sums to the federal deficit, which she said is enough reason to oppose it.
The purpose of Trump’s visit to the weekly Tuesday lunch of Senate Republicans was to unify the party for a tough tax fight they believe is critical to their prospects of staying in power. Afterward, Republicans said that the meeting was cordial and that the president was well-received.
Trump’s visit was overshadowed by an escalation of tensions between him and Sen. Bob Corker, R-Tenn., chairman of the Senate Foreign Relations Committee, who said the tax effort would go more smoothly if the president stayed on the sidelines. The comment, seen by many as an indication of widespread distrust among Republicans of the president’s ability to lead
them through the thicket of political and policy trade-offs that their tax ambitions present, set off a series of insulting early-morning tweets by Trump, accusing Corker, a vital vote on any tax plan, of “fighting” tax cuts.
Corker, who announced last month that he would not seek re-election next year, responded on Twitter by calling Trump “an utterly untruthful president,” adding to reporters later that Trump is “debasing” the presidency. In another development Tuesday, Sen. Jeff Flake of Arizona, another key Republican and outspoken Trump critic, announced that he too would not seek reelection in 2018, citing the direction of the party under the president.
Senate Majority Leader Mitch McConnell, R-Ky., dismissed the turmoil in his party, saying, “If there’s anything that unites Republicans, it’s tax reform.”
To avoid a Democratic filibuster, Senate Republicans plan to pass their tax bill by requiring only a simple-majority vote, the same strategy they used in their unsuccessful attempt to repeal the Affordable Care Act. Even with that, Republicans, who hold just a 52-48 edge over Democrats, can afford to lose only two votes on any legislation.
As of Tuesday, Republicans have no written tax legislation, but the House is expected to release a bill as early as next week. For now, Republicans are working from a framework that calls for slashing the corporate tax rate from 35 percent to 25 percent and cutting individual income tax rates, along with reducing the seven individual income tax rates to three: 12, 25 and 35 percent.
The general plan, as currently known, would eliminate the Alternative Minimum Tax, aimed at ensuring that highincome households pay federal taxes; repeal the estate tax that applies to estates over $5 million; and create a special 25 percent tax rate for “passthrough” corporations. Such corporations are often used by high-income individuals to shield their income from the higher 39.5 percent tax rate.
Democrats issued their own state-by-state analysis of the plan as it exists, based on tax proposals Republicans floated last year in the House. The analysis, produced by the liberal Institute on Taxation and Economic policy, shows that 6 million California households deduct state and local taxes, averaging $18,437.
Republicans have ruled out eliminating the popular deductions for mortgage interest and charitable giving, but the analysis warned that without the state and local tax deduction, millions of taxpayers would likely no longer itemize the mortgage interest and charitable deductions. Democrats said the mortgage interest deduction would be “useless” for any Californian with a home valued at less than $801,000.
The analysis also showed that the top 1 percent of Californians would receive 81.7 percent of the tax breaks offered under the GOP plan, with an average tax cut of $90,000.
The White House Council of Economic Advisers contends, however, that slashing the corporate tax rate will produce $4,000 in additional income to the average U.S. household by boosting business investment and worker productivity.