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Rubio (R-Fla.) has complained that Republicans did not do more to
further expand the Child Tax Credit. But neither has said whether …
Republicans reach compromise tax plan, expanding tax cuts for the wealthy
The agreement would also lower the top tax rate for families and individuals from 39.6 percent to at least 37 percent, a change that would deliver a major tax cut for upper-income households.
“We’ve reached an agreement, I’ll just put it that way,” Senate Finance Committee Chairman Orrin G. Hatch (R-Utah) told reporters Wednesday while declining to offer any details. “You’ll get it soon enough. I just want to talk to the president first.”
President Trump had previously said he would not support a tax overhaul that set the corporate rate at any level above 20 percent. But Wednesday at the White House he expressed support for the 21 percent threshold, saying it still amounted to a major reduction.
“This is one of the biggest pieces of legislation ever signed by this country,” Trump told reporters at the White House.
Trump says he's confident that Republican leaders in the House and the Senate are close to an agreement on their tax bill.
Negotiators have spent almost two weeks trying to reconcile differences between separate tax bills passed by the House and Senate.
They faced competing pressures that they had to address in order to build a coalition of support.
Wealthy Americans, many of whom were GOP donors, demanded the lower individual tax rate, something House Republicans pushed into the final package with the 37 percent rate.
Republicans in California, New York, and New Jersey demanded changes that would allow Americans to deduct more state and local taxes. This demand was also met, with negotiators allowing Americans to deduct up to $10,000 in property or income taxes.
But the centerpiece of the bill is the major reduction in the corporate tax rate
The House bill would have lowered the corporate tax rate from 35 percent to 20 percent in 2018. The Senate bill would have lowered the corporate rate to 20 percent starting in 2019. Negotiators decided to move the rate to 21 percent to offset some of the cost of having the lower rate kick in immediately.
President Trump was asked Dec. 13 whether
it's crucial for Republicans to vote on their tax bill soon, after
losing a seat in the Senate on Dec. 12.
Republicans heard complaints from a number of wealthy Republicans in New York and California who argued they could see their taxes go up if the top rate wasn’t lowered, and Trump said last week the GOP might accommodate some of these concerns.
The mortgage-interest deduction would be changed to limit the benefit to interest paid on $750,000 in home loans, down from the $1 million limit currently in place.
The tax plan would also repeal the enforcement of a part of the Affordable Care Act that requires almost all Americans to have some form of health insurance or face a financial penalty. The repeal was part of the Senate bill but not included in the version that passed the House.
And the agreement would allow sole proprietors, partners, and others who run businesses through the individual income tax code to deduct 20 percent of their income before paying taxes.
The people spoke on the condition of anonymity as they were not authorized to discuss the private talks.
Republicans have said their tax overhaul is necessary to make U.S. companies more competitive globally, spur economic growth and increase wages. Democrats have countered the changes primarily benefit the wealthy and global companies, and they have complained that the changes would add to the debt.
Even before Wednesday’s changes, multiple analyses have said the biggest benefits for the tax changes would fall to corporations and the wealthy. The benefits for the middle class would be more uneven, with most seeing a temporary tax cut but others seeing their taxes slightly increase.
It’s unclear if all Senate Republicans support the changes. The party can only afford to lose one more GOP vote if they hope to pass the agreement, as Sen. Bob Corker (R-Tenn.) already opposes the measure.
Sen. Susan Collins (R-Maine) has expressed concern about lowering the top tax rate, and Sen. Marco Rubio (R-Fla.) has complained that Republicans did not do more to further expand the Child Tax Credit. But neither has said whether they would oppose the bill.
Republicans control 52 of the 100 seats in the Senate and need 50 votes to pass their plan, as Vice President Pence could break a tie if necessary.
The agreement comes less than 24 hours after Republicans were rocked by the results of a special Senate election in Alabama, where GOP candidate Roy Moore was defeated by Democrat Doug Jones. Jones is not expected to take office until late December or early January, giving Republicans time to pass their tax plan into law.
The tax plan would lower rates on businesses and individuals, expand the Child Tax Credit, roughly double the standard deduction, and eliminate numerous tax deductions.
Many of the benefits for families and individuals would be temporary, expiring after a period of years. The tax breaks for most businesses, however, would be locked in permanently, a condition that Republicans have said will help firms make long-term investment decisions.
The package is expected to add at least $1 trillion to the debt over 10 years. Republicans and White House officials have said it would lead to so much economic growth that it would wipe out any impact on the debt, though they haven’t offered any economic models to back up this assertion.
The changes could have an immediate impact on businesses and households next year because of the lower tax rates, but they will also lead to an immediate scramble as Americans adjust to the new regime.
Even though Republican reached an agreement in principle on Wednesday, they still have more work to do.
A Senate GOP aide said they need to finish drafting the new bill and work with the Joint Committee on Taxation to ensure that the parameters of the bill meet budget rules. They plan to release more details later in the week, including a “conference report” that will be voted on by the House and the Senate.
Congress convened a “conference committee” of House and Senate lawmakers to meet and try to marry the House and Senate-passed bills, and that group will meet Wednesday at 2 p.m. The meeting is expected to be largely ceremonial, however, as members worked out many of the details beforehand.
Read more:
Democrats call for halt to GOP tax bill until Jones is seated in the Senate
The Finance 202: Doug Jones victory will likely speed up Republican tax train
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