White House, senators finishing off tax bill

Deductions ended for state, local taxes in Senate GOP plan.

WASHINGTON — Top administration officials met privately with Republican senators Wednesday as Senate GOP tax writers put finishing touches on their highstakes bill cutting levies on people and corporations and reshaping the federal tax code.

A day before Senate Finance Committee Chairman Orrin Hatch, R-Utah, planned to unveil the legislation, some of its most basic contours seemed set while others seemed in flux.

As leaders hunted for ways to pay for their tax cuts, Sen. David Perdue, R-Ga., said the measure would eliminate the deduction people can take for state and local property, income and sales taxes. The House version would retain the deduction only for property taxes and cap that at $10,000, a provision that has drawn opposition from GOP lawmakers from states with high local taxes like New York and New Jersey.

Perdue said the Senate plan would compress the current seven personal income tax brackets down to four. On Tuesday, two Republicans had said the bill would retain the seven brackets but cautioned that changes were possible.

Unclear was whether Hatch’s plan would include a one-year delay in its reduction in the corporate tax rate. Shrinking that rate to 20 percent from its current 35 percent has been a chief goal of President Donald Trump and the business community, but senators were considering delaying that reduction as a way of containing the bill’s costs.

“We’re excited, everything looks good,” Treasury Secretary Steven Mnuchin told reporters after he and chief White House economic adviser Gary Cohn met with Republicans on Hatch’s panel in the Capitol late Wednesday.

The tax bill must worsen federal deficits by no more than $1.5 trillion over the coming decade. If Republicans don’t do that, the measure will be vulnerable to a bill-killing Senate filibuster by Democrats that GOP senators lack the votes to block. It also cannot add to red ink beyond the first 10 years without facing the same fate.

The Congressional Budget Office said the House bill would actually drive up shortfalls by $1.7 billion over 10 years. But $259 billion of that is interest costs for added borrowing the government would need, and under Senate rules those costs don’t count in determining whether that chamber has met its target.

Across the street, the House Ways and Means Committee staged its third day of debate on the nearly $6 trillion legislation, with the Republican-led panel wading through dozens of amendments and rejecting Democrats’ efforts to revise the bill. Republicans are determined to produce tax cuts and send a measure to Trump by Christmas to protect their congressional majorities in next year’s elections.

The committee voted along party lines against a battery of Democratic proposals to restore to the bill tax benefits to student borrowers, people with significant medical expenses, homeowners and teachers.

The proposed elimination of the deduction for medical expenses not covered by insurance is especially controversial. The deduction has helped offset costs of such things as nursing home care, laser eye surgery and out-of-state travel for a second opinion on a rare cancer.

Eliminating it “is a direct assault,” said Rep. John Larson, D-Conn., the failed amendment’s sponsor. “This is devastating to individual families.”

House Speaker Paul Ryan said the Republican drubbing in Tuesday night’s elections “just puts more pressure on making sure we follow through” on the party’s drive to overhaul the tax code.