GOP proposes deep tax cuts, provides few details on how to pay for them – Washington Post

Republican leaders on Wednesday proposed slashing tax rates for the wealthy, middle class and businesses, while also preserving popular tax deductions that encourage buying homes and giving to charity, according to a 9-page framework they hope will eventually unify the party behind a proposal to revamp the U.S. tax code.

But the document, titled “Unified Framework For Fixing Our Broken Tax Code,” leaves many key questions unanswered. In it, the White House and Republican congressional leaders do not identify the numerous tax breaks they say will be removed in order to offset some of the trillions of dollars in revenue lost by cutting tax rates.

The framework is being presented to Republicans and the public Wednesday as a starting point for negotiations on a tax deal. Congress must vote the changes into law, and Republican leaders are now tasked with resolving controversial questions to unite their party — and possibly some Democrats — behind tax legislation.

The White House and GOP leaders negotiated for months and so far have only agreed in large part on the taxes they want to cut.

They propose, among other things, cutting the corporate tax rate from 35 percent to 20 percent and making it much easier for multinational companies to bring money earned overseas back into the United States. This is roughly in line with a longstanding House Republican goal, though President Trump has consistently pushed for the corprate rate to be lowered to 15 percent.

They also propose collapsing the seven individual income tax brackets into three, and allowing more people to qualify for the Child Tax Credit, which is designed to help low-income working families.

But they stop far short of offering a complete plan, a calculated decision they made in order to delay attacks from business groups that they fear will erupt once they realize some of their favored tax breaks could be eliminated.

Some budget experts believe the blueprint outlined by Republicans on Wednesday could decrease government tax revenue by more than $5 trillion over 10 years. To offset some of that loss, Republicans need to identify tax benefits that they plan to jettison. That process has not yet begun.

“I hope that people will have the intestinal fortitude it’s going to take to do it right,” said Sen. Bob Corker (R — Tenn.) said late Tuesday. “People say the health care was hard, you have no idea. You have no idea how this is going to be.

Republicans said they would curb some of the tax benefits companies claim from interest they pay on their debt, but those savings would largely be applied to allowing companies to expense all investments in things like equipment for five years. They also call for preserving the tax benefit companies receive for research and development, a popular benefit that encourages innovation and saves companies roughly $100 billion a year.

The framework would, among other things, roughly double the standard deduction that married families and individuals use to reduce their taxable income, a change that Republicans hope will simplify the filing system.

They also are holding out the possibility of imposing a new, higher tax rate on the wealthy to ensure that the tax changes don’t disadvantage the middle class, though the White House and GOP leaders have not agreed on how that would work.

To be sure, many of the tax changes would benefit upper-income Americans. The Republicans propose eliminating the estate tax and the alternative-minimum tax. The tax framework does not mention Trump’s longstanding promise of raising taxes for hedge fund managers, suggesting differences on this point have not been resolved.

And while it preserves tax breaks for mortgage interest and charitable contributions, it proposes changing the tax benefits that benefit retirement and education. It’s unclear how those changes might work.

Republicans see their control of the White House and Congress as a rare opportunity to deliver once-in-a-generation changes to the tax code that they believe will grow the economy and boost wages.

They are trying to fashion the tax changes in a way that essentially add around $1.5 trillion in debt over 10 years, a level that many Republicans believe is acceptable in order to achieve the tax changes.

The next step for congressional Republicans is to pass a budget resolution that will allow a tax bill to pass the Senate with a 51-vote majority rather. Senate bills often need 60 votes to overcome a filibuster, but the budget resolution would allow Republicans to use a process known as “reconciliation” to avoid that higher threshold.

Sen. Patrick J. Toomey (R — Pa.) said Wednesday the Senate Budget Committee is expected to send a draft budget to the Senate floor next week.

The House could hold a floor vote on their budget as soon as next week as well, setting up a conference between the chambers. Senior Republicans expect the final, consensus budget resolution to more closely resemble the Senate version.

Once the budget resolution passes both chambers, the tax-writing committees — Senate Finance and House Ways and Means — will begin drafting and amending tax legislation, where the politically thorny work of identifying revenue offsets will take place.

Toomey acknowledged that hard trade-offs are ahead, saying that lawmakers will have to identify offsets of around $3 trillion over 10 years to align the plan with the budget resolution.

The framework released Wednesday calls for eliminating many business tax credits and individual income deductions, while specifically naming only a few that should be spared.

“We’ve definitely identified the items that can get us there,” Toomey said. “The question is, will we have the political will to do it?”

To raise revenue to offset the cuts, Republicans are likely to consider limiting or eliminating the deductibility of state and local taxes, a prosopal that is already generating opposition from lawmakers in states with high tax burdens. They’ll also consider limits on how much businesses can deduct for interest payments, a tax provision frequently used by financial and real estate firms.

“Those are those are two big ones that have to be on the table,” Toomey said.

Democrats, so far, have had only a peripheral role in the process. Some Democratic members of the House Ways and Means Committee were invited to a White House meeting with Trump Tuesday, where they said the president repeatedly emphasized the need for bipartisanship, but Democrats had no role in drafting the blueprint and most roundly rejected it Wednesday.

Democrats have said they will oppose tax changes that add to the debt or benefit the wealthiest Americans. Those so far appear to be major elements of the GOP proposal, which Democrats noted Wednesday as they attacked the plan.

Proposals in the GOP framework “would result in a massive windfall for the wealthiest Americans and provide almost no relief to middle-class taxpayers who need it most,” Senate Minority Leader Chuck Schumer (D – N.Y.) said on the Senate floor. “It seems that President Trump and Republicans have designed their plan to be cheered in the country clubs and the corporate boardrooms.”

Schumer is trying to hold Democrats united, which could prove a difficult task as a number have shown interest in negotiating tax changes with Trump. The White House is trying to court several Senate Democrats who are up for reelection in conservative states next year, convinced that they might feel pressure to cut a deal in order to preserve their seats.

“Republicans’ tax framework is not tax reform,” said House Minority Leader Nancy Pelosi (D-Calif.). “It is a framework that gives away the store to the wealthiest, while sticking the middle class with the bill.”

Karoun Demirjian contributed to this report

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