Congress deals with unclear tax plan, targets business rate

WASHINGTON — The country’s tax policies need to be reformed, and changes must not increase the burden on the middle class. Congressional Republicans and Democrats agree on that much.

They’re sure to do battle, though, over the details.

Democrats say they’re trying to withhold comment until Republicans put out a formal plan, but they don’t like what they’re hearing so far, which sounds to them a lot like Reagan-era trickle-down economics.

“It’s premature and so early to be having that conversation right now,” one Democratic aide said on background. “Our folks are engaged on this to the extent they’re able to, but it’s a chicken-and-egg thing right now. They’re trying to look at what options are available without jumping the gun” because they don’t know what Republicans are working on.

One thing is clear: Republicans want to cut business tax rates to make U.S. companies more competitive and allow employers to hire more workers at higher wages. That means less revenue collection at least until the promised economic boost takes hold. And that means program cuts.

“I want tax rates lower because I think it’s important to have tax cuts, and I want to look at what actually drives revenue,” said Rep. Mike Kelly, RButler. “We have to take a look at programs that have gone way beyond their original intent.”

He declined to name specific programs he would cut.

Rep. Keith Rothfus, R-Sewickley, said he’s less

interested in cutting programs than restricting their growth.

“We have to prioritize where we’re going to be spending money. We have a lot of responsibilities coming down the pike — with baby boomers retiring — that are going to demand resources,” he said. “If we expect to meet the commitments we’ve made to seniors, we’re going to have to control discretionaryspending.”

Democrats are concerned that the GOP plan will wind up looking less like real tax reform and more like big tax cuts for the wealthy that are not offset with other revenue.

“A large unpaid-for tax cut ends up impacting in a really real way the programs and spending that Americans rely on,” the Democratic aide who spoke on background said.

As a member of the House Ways and Means Committee, Mr. Kelly is likely to play a role in shaping legislation, as is Sen. Pat Toomey, a fiscal conservative whom congressional leaders often turn to for help on major revenue and budget bills.

Mr. Toomey has been working on the issue during lawmakers’ summer break. Last week alone, he held at least seven events in Pennsylvania where he focused on the budget. The issue also came up Thursday during and after a televised town hall meeting in Bethlehem.

“We should lower the business rate because 35 percent is uncompetitive,” he told reporters after the town hall.

He said brackets should be consolidated and marginal tax rates reduced for individuals.

“I think there’s a lot of agreement about those items, and I hope they’ll all be in a package,” he said.

Democrats say any reductions in individual tax rates could be offset by other proposals floated by Republicans, such as eliminating the mortgage interest deduction that saves homeowners thousands on their income tax bills.

“That’s the one deduction that the middle class has and they’re attacking it. The middle class has very few deductions, and home ownership is something that’s valued in this country,” said Rep. Mike Doyle, D-Forrest Hills.

He said he wants to work with Republicans on tax reform but can’t “if it’s the kind of situation where people at the top are going to get the lion’s share of the tax cut … and people in the middle class and working class are just going to get the crumbs.”

Republicans say that’s not what they’re trying to do.

“I’ve not met a senator yet that thinks we ought to raise taxes on the middle class. There isn’t one, so that’s not going to happen,” Mr. Toomey told WILK News Radio in Wilkes-Barre last week.

Republicans are demanding corporate tax relief because they say it will help everyone by growing the economy.

“I think there needs to be relief for business,” Mr. Toomey told WILK. “If it’s easier and better to do business in America, that means more investment, more jobs, higher wages. That’s good for our middle class, as well.”

“People I serve with on both sides of the aisle want to make sure middle-income and lower-income people are the greatest beneficiaries of tax cuts, but a few can’t get beyond this thing that it’s only about the rich. It’s about everyday Americans.”