GOP may cut rate for richest taxpayers

WASHINGTON — Republican lawmakers, scrambling to reach agreement on a final tax bill that they hope to pass next week, are coalescing around a plan that would slightly raise the proposed corporate tax rate, lower the top rate on the richest Americans and scale back the existing mortgageinterest deduction.

In a frenzy of last-minute negotiations, Republicans drew closer to agreement

on nudging up the reduced corporate tax rate to 21 percent from the 20 percent in the bills that passed the House and Senate, according to a lawmaker and a person briefed on the discussions. The current rate is 35 percent.

Republicans also are considering lowering the top individual tax rate to 37 percent from the current top rate of 39.6 percent to assuage concerns among some wealthy taxpayers that their tax bills could rise under the current legislation, which eliminates a host of individual tax breaks.

Another closely watched change centers on the ability to deduct the interest on mortgage debt. Lawmakers are discussing limiting the deduction to mortgage debt of up to $750,000 for newly purchased homes, a higher cap than the $500,000 limit in the House-passed bill but lower than the existing $1 million limit that remains in the Senate-passed bill, according to Sen. John Kennedy, R-La.

The negotiations come as lawmakers in the House and Senate seek to align their tax bills, which differ in significant ways and must be reconciled to ensure enough Republican support to pass along party lines.

Under Senate rules, the final bill can add no more than $1.5 trillion to federal budget deficits over a decade, a restriction that has led to a frantic game of budget chess as lawmakers look for ways to pay for the changes they are considering. Lowering the top individual tax rate to 37 percent, for instance, will result in less tax revenue for the Treasury Department. Raising the corporate tax rate to 21 percent will help bring in a bit more money to help lawmakers stay in that $1.5 trillion box.

In a sign of how difficult it is to build consensus for such a fast-moving bill, Sen. Susan Collins, R-Maine, said Tuesday that she did not like the idea of lowering the top individual rate, which is 38.5 percent in the Senate bill and 39.6 percent in the House version.

“I don’t think lowering the top rate is a good idea,” Collins said, explaining that she prefers the House version that would not lower the top tax rate. “I had hoped that the House position, the original House position, would prevail.”

However, Collins, who negotiated several changes to the final version of the Senate tax bill in exchange for her vote, would not say whether a reduction in the top rate is a deal breaker.

“I’m going to wait and look at the entire conference report and what all of the provisions are,” Collins said. “There are a lot of rumors flying around.”

The bipartisan conference committee is scheduled to hold its one public meeting Wednesday afternoon. Although that meeting will give Republicans and Democrats a final chance to publicly debate the merits of a $1.5 trillion tax cut, it is not expected to alter the trajectory of the bill or its details.

Also on Wednesday, President Donald Trump plans to deliver at the White House what administration officials called a “closing argument” for the tax bill.

The big sticking points include whether to scrap or keep the corporate alternative minimum tax and the estate tax for individuals, and how low to set the corporate tax rate.

“Certainly the president indicated he would be willing to go up a bit, and there’s been some other concerns,” Sen. Bill Cassidy, R-La., said of raising the corporate tax rate to pay for other fixes in the bill. “Everything’s a little bit in flux.”

Among the most politically sensitive issues lingering is how to treat the state and local tax deduction, known as SALT, which is capped at $10,000 in property taxes in the House and Senate bills. Lawmakers have been working through possible compromises that would let people continue to deduct a certain amount of property or income taxes, but Republicans still run the risk of raising taxes on broad portions of middle-income constituents. Scaling back the SALT deduction appears to be a risk some are willing to take.

“Will there be some outliers who pay more in taxes? Yes,” Sen. Patrick Toomey, R-Pa., said Tuesday on CNBC. “There are some people who will pay more because they live in very high-tax jurisdictions.”

However, Rep. Darrell Issa, R-Calif., called on members of the conference committee to rethink eliminating the state and local tax deduction as they craft a final bill.