GOP tax plan would slash corporate rate, help wealthiest

WASHINGTON — House Republicans on Thursday unveiled a tax cut plan that slashes the corporate tax rate, lowers taxes for most Americans but limits a cherished deduction for homeowners as President Donald Trump and the GOP seek to deliver on the first tax revamp in three decades.

The proposal would add $1.5 trillion to the nation’s debt over the next decade as Republicans largely abandoned fiscal discipline in a desire to secure a legislative achievement for Trump and score a political win ahead of next year’s midterm elections.

Middle-income families would pay less, thanks to doubling of the standard deduction and an increase in the child tax credit. Wealthy Americans, like Trump, would benefit from the repeal of the alternative minimum tax and phase out of the estate tax.

Some two-income, upper middle class families would pay more after being bumped into a higher tax bracket and losing a valuable deduction on state income taxes.

GOP leaders briefed rank-and-file lawmakers on the proposal Thursday morning ahead of a show-of-unity event at the White House with Trump.

“Today is the day. We are introducing legislation that will cut your taxes & make the entire system more simple. This will be a game-changer,” Speaker Paul Ryan, R-Wis., said on Twitter.

House Speaker Paul Ryan of Wis., right, leaves a GOP conference on taxes, Thursday, Nov. 2, 2017, on Capitol Hill in Washington. (AP Photo/Jacquelyn Martin)

The proposal would leave intact the existing rules on 401(k) retirement accounts and the ability of Americans to contribute up to $18,000 into the accounts tax-free. But the plan limits the widely used deduction for mortgage interest for new home loans of $500,000 or less, a sharp reduction from the current $1 million cap.

The plan also limits the deductibility of local property taxes to $10,000 while eliminating the deduction for state income taxes, which has generated significant opposition from Republicans in high-tax states such as New York and New Jersey.

The tax-writing Ways and Means Committee will work on finalizing the proposal next week, and the GOP’s ambitious timetable to get a bill to Trump by Christmas faces numerous roadblocks. The proposal caused anxiety for some House Republicans and drew criticism from a few in the Senate, which is intent on writing its own bill.

Rep. Dan Donovan, R-N.Y., said he still had concerns about the state and local tax deduction, and planned to meet with leadership.

“We’re going to look at all of this to see how it all plays out,” he told reporters as he emerged from the GOP caucus.

The plan shrinks the number of tax brackets from seven to three or four, with respective tax rates of 12 percent, 25 percent, 35 percent and a category still to be determined. The tax system would be simplified, and most people would be able to file their returns on a postcard-sized form.

The plan sets a 25 percent tax rate starting at $90,000 for married couples, with a 35 percent rate beginning to bite at $260,000 — which means many upper-income families whose top rate is 33 percent would face higher taxes. Individuals making $500,000 and couples earning $1 million would face the current Clinton-era top rate of 39.6 percent.

The plan slashes the corporate tax rate from 35 percent to 20 percent, a demand of Trump. It also repeals the inheritance taxes on multimillion-dollar estates, a big break for the wealthy.

“There are a lot of people still in our conference who are anxious to see exactly how this plays out with growth in the economy, what the long term deficit and debt situation turns out to be,” said Rep. Steve Womack, R-Ark.

The child tax credit would be increased from $1,000 to $1,600, though the $4,050 per child exemption would be repealed.

Sen. Marco Rubio, R-Fla., tweeted: “House #TaxReform plan is only starting point. But $600 #ChildTaxCredit increase doesn’t achieve our & @potus goal of helping working families.”

The legislation is a longstanding goal for Capitol Hill Republicans who see a once-in-a-generation opportunity to clean up an inefficient, loophole-cluttered tax code.

The plan calls for nearly doubling the standard deduction used by most average Americans to $12,000 for individuals and $24,000 for families, and increasing the per-child tax credit. On net, it could mean tax increases for many upper middle-income families.

Republicans and Trump argue that sharply cutting tax rates for businesses improves U.S. economic competitiveness.

The emerging plan would retain the Clinton-era 39.6 percent income tax rate for the wealthiest earners. But for that highest bracket, the tax writers raised the minimum level of income to $1 million for couples or families from the current $470,000 — a change that would reduce tax revenue.

Democrats have repeatedly complained the plan was too favorable to business and the wealthy, and contradicted Trump’s rhetoric of bringing tax relief and economic benefit to the stressed middle class.




Trump turns back to tax overhaul; pitch aimed at truckers

WASHINGTON — After days dominated by friction with his secretary of state and a Republican senator, President Donald Trump is trying to refocus on his top legislative priority, using a Pennsylvania visit to pitch his tax overhaul as a boon for truckers.

Trump speech in Harrisburg was to be set against a backdrop of big rigs, with lots of truckers in attendance, according to the White House. The president has been traveling the country to promote a plan that would dramatically cut corporate tax rates from 35 percent to 20 percent, reduce the number of personal income tax brackets and boost the standard deduction.

At his latest stop, Trump planned to argue that his tax reform framework would benefit truckers by lowering their tax rates, boosting manufacturing, and making it easier for families to pass their trucking businesses on to their children.

“When your trucks are moving, America is growing. That is why my administration is taking historic steps to remove the barriers that slow you down,” Trump said in prepared excerpts released by the White House. “America first means putting American truckers first.”

Trump is diving back into the tax fight after weeks in which his attention has shifted to rapidly emerging crises — including the mas shooting in Las Vegas and the hurricane recovery effort in Puerto Rico — as well as dramas of his own making, such as his escalating feud with Sen. Bob Corker, R-Tenn., and public tension with Secretary of State Rex TIllerson.

Taxes are the chief legislative priority for Republicans hungry for a major legislative achievement. With the 2018 campaign year looming, GOP lawmakers want something to show for their time as the majority party, and tax legislation remains their best hope.

Trump has left it up to Congress to fill in many specifics of his plan, which omits details such as the income levels for his new tax brackets.

Republicans in Congress aren’t solidly behind him, with some from high-tax states balking because the framework calls for eliminating the federal deduction for state and local taxes. That deduction is claimed by an estimated 44 million people and costs the government an estimated $1.3 trillion in lost revenue over 10 years.

Fractious Republican lawmakers, especially those from New York, New Jersey and California, are wary of the potential financial hit to their constituents. They contend repealing the deduction would subject people to being taxed twice.

“They need our votes” on the tax plan, said Rep. Chris Collins, R-N.Y., a member of the group.

Discussions with House leaders on a possible compromise took place last week but are on hold, Collins and other lawmakers in the group said Wednesday. They said they were confident of a compromise.

Trump planned to highlight the tax plan’s provisions aimed at encouraging international companies to bring back, or repatriate, cash that they’ve kept overseas. All told, there’s more than $1 trillion in cash held abroad by S&P 500 companies, according to Deutsche Bank.

“We will eliminate the penalty on returning future earnings back to the United States and we will impose a one-time low tax on money currently parked overseas so it can be brought back home to America, where it belongs,” Trump said in the prepared excerpts. He added that his Council of Economic Advisers estimates that the change “would likely give the typical American household a $4,000 pay raise.”

The $4,000 in additional income estimate comes from a back of the envelope calculation by White House economics adviser Kevin Hassett based on companies returning 71 percent of their foreign profits over the course of eight years.

This estimate appears to assume that the returned profits would flow to workers in the form of higher wages. But many economists say much of it would likely be returned to investors in the form of stock dividends and buybacks.

White House requests $5B to ease Puerto Rico fiscal crisis 

 




Trump promotes ‘giant, beautiful, massive’ tax plan

By Darlene Superville

WASHINGTON, D.C. — President Donald Trump said Friday that the centerpiece of his plan to help American businesses and workers “thrive, compete and grow” is a “giant, beautiful, massive, the biggest ever in our country, tax cut.”

Trump and congressional Republicans unveiled the broad outlines of the tax plan earlier this week.

“My administration is working every day to lift the burden on companies and workers so you can thrive, compete and grow,” Trump said in a speech to the National Association of Manufacturers. He said the tax cut plan was a core element.

The nearly $6 trillion plan sketched out this week by Trump and other officials would deeply reduce taxes for corporations, simplify tax brackets and nearly double the standard deduction used by most tax filers. But many details remain to be fleshed out.

President Donald Trump speaks to the National Association of Manufactures at the Mandarin Oriental hotel, Friday, Sept. 29, 2017, in Washington. (Evan Vucci/AP)

In the remarks, Trump highlighted a provision of the plan that would allow businesses for the next five years to write off the full cost of new equipment in the year it’s purchased. Trump said that proposal alone will encourage companies to invest and create jobs.

Under the broader proposal, corporations would see their top tax rate cut from 35 percent to 20 percent. Seven personal tax brackets would be reduced to three: 12 percent, 25 percent and 35 percent. But the information released didn’t include the income levels applied to the rates, making it difficult to know how a typical family’s tax bill may be affected.

Trump said a 20 percent corporate tax rate will be the lowest top marginal income tax rate for small- and medium-sized businesses in more than 80 years. “It will be rocket fuel for our economy,” he said.

The Republican tax plan also recommends a surcharge for the very wealthy. The standard deduction would nearly double to $12,000 for individuals and $24,000 for families, basically increasing the amount of personal income that would not be taxed. Deductions for mortgage interest and charitable giving would remain, but the plan seeks to end most other itemized deductions.

Report finds Republican tax plan benefits top 1 percent

Meanwhile, Senate Republicans unveiled a budget plan Friday that lays the groundwork for overhauling the tax code. The House and Senate must pass the blueprint before lawmakers can tackle the still-developing tax bill.

The Senate Budget Committee release comes before a committee vote next week. A companion House measure is headed for a floor vote next week, too.

In the address, Trump also reviewed policy changes since he took office in January that he said are intended to improve the business climate, including lifting restrictions on energy production, reversing environmental rules and rolling back regulations.

He also highlighted economic gains of the past eight months.

Jay Timmons, president and CEO of the association, said Trump is a leader “who has made manufacturing the engine of our country.”

Trump wants to sign tax legislation into law by the end of the year.




Report finds Republican tax plan benefits top 1 percent

By Erica Werner and Marcy Gordon

WASHINGTON, D.C. — The new GOP tax plan delivers a big tax cut to the wealthiest Americans while some in lower tax brackets would end up paying more, according to an analysis Friday from prominent nonpartisan researchers.

The plan being touted by President Donald Trump as the biggest tax cut ever delivers 50 percent of its total tax benefit to taxpayers in the top 1 percent, those with incomes above $730,000 a year, according to the Tax Policy Center of the Urban Institute and Brookings Institution. For those wealthy taxpayers, their after-tax incomes would increase 8.5 percent next year.

For other taxpayers, though, the benefits are far more modest or non-existent, the report finds. Taxpayers in the bottom 95 percent would see tax cuts averaging 1.2 percent of after-tax income or less next year.

And about 12 percent of taxpayers would face a tax increase next year, of $1,800 on average. That includes more than a third of taxpayers making between about $150,000 and $300,000, mostly because of the elimination of many itemized deductions.

Senate Majority Leader Mitch McConnell, R-Ky., center, with Speaker of the House Paul Ryan, R-Wis., left, and other GOP members as they talk about the Republicans’ proposed rewrite of the tax code for individuals and corporations, at the Capitol in Washington, Wednesday, Sept. 27, 2017. (Pablo Martinez Monsivais/AP)

By 2027, taxes would increase for about a quarter of Americans, including nearly 30 percent of those earning about $50,000 to $150,000 a year, and 60 percent of people making $150,000 to $300,000, according to the study.

“The number of taxpayers with a tax increase rises over time,” it said. That’s because the Republican plan would replace personal exemptions, which are tied to inflation, with some tax credits that aren’t tied to inflation.

The findings were certain to fuel the Democrats’ main attack line against the GOP plan: That it’s a giveaway to the rich at the expense of the middle class. Republicans immediately disputed the analysis.

“This so-called study is misleading, unfounded and biased,” said House Ways and Means Chairman Kevin Brady, R-Texas. “TPC makes a variety of overreaching and unrealistic assumptions about policy decisions members of Congress still have to make as we draft pro-growth tax legislation. Republicans are unified in delivering tax reform that will lower taxes on middle-class Americans, ensure they are able to keep more of their hard-earned money, and grow our economy.”

The Tax Policy Center noted that its analysis was preliminary, based on a proposal that itself lacked key information, such as the proposed income brackets that would correspond to the three new tax rates Republicans envision replacing the current seven.

The findings came as Senate Republicans unveiled a budget plan that lays the groundwork for their effort to overhaul the nation’s tax system. Provisions in the budget would allow Senate Republicans to pass the tax package with a simple majority of votes, preventing Democrats from being able to block the legislation and rendering Democratic votes unnecessary.

The Tax Policy Center’s analysis was based on an ambitious framework released Wednesday by the Trump administration and congressional Republicans that aims to reform the loophole-ridden code and dramatically cut corporate rates, from 35 percent to 20 percent. It’s the GOP’s marquee legislative project this year, following the embarrassing failure on health care.

Trump described the tax plan Friday as a “giant, beautiful, massive, the biggest ever in our country, tax cut.”

The tax legislation can advance only after House and Senate passage of the budget blueprint. The Senate Budget Committee intends to vote on its plan next week. A companion measure is headed for a House vote next week as well.

The new budget plan would permit the upcoming tax measure to add $1.5 trillion over the coming decade to the $20 trillion national debt. The Tax Policy Center finds the GOP tax plan would reduce federal revenues by $2.4 trillion over the next decade.

Without the budget passage, Senate Majority Leader Mitch McConnell of Kentucky said in a statement, “Democrats will continue to play partisan politics and obstruct our efforts to get our economy flourishing and growing at its full potential.”

More broadly, the Senate plan promises a balanced budget over the coming decade, but it relies on rosy projections of economic growth and spending cuts that Republicans have no plans to deliver. It would keep Pentagon spending mostly frozen at current levels, rather than the almost $90 billion increase demanded by GOP military hawks.

The budget also contains a provision that could allow the Senate to approve legislation opening up drilling in the Arctic National Wildlife Refuge. That’s a longtime goal for Republicans, including Alaska Sen. Lisa Murkowski, a moderate whose vote will be needed on tax legislation.




AP FACT CHECK: Smoke and mirrors in Trump tax plan

By Calvin Woodward and Josh Boak

WASHINGTON, D.C. — Nothing brings out smoke and mirrors like a tax overhaul plan, especially one as incomplete as President Donald Trump’s.

A look at some of the claims emerging from the debate sparked by the plan released Wednesday:

TRUMP: “I think there’s very little benefit for people of wealth” — to reporters Wednesday.

THE FACTS: Actually there’s a clear and substantial benefit for people of super wealth: the proposal to eliminate the estate tax. Under current law, the first $11 million of an estate is exempt for a married couple, meaning only the wealthiest Americans pay it. Those super-rich would be off the hook. Also, business owners who report business income on their individual returns — as most do — would see their top tax rate drop to 25 percent from 39.6 percent.

President Donald Trump speaks about tax reform at the Farm Bureau Building at the Indiana State Fairgrounds, Wednesday, Sept. 27, 2017, in Indianapolis. (Alex Brandon/AP)

Some of Trump’s claim rests with the administration’s own unique accounting. The administration has said it isn’t including the estate tax when making calculations about which income groups would benefit from the plan. Nor is it clear how Trump officials are weighing the benefits of the lower corporate taxes — which would primarily help investors.

More generally, the plan has so many holes — left for Congress to fill in — that a full picture of who gains the most cannot be drawn at the outset. The plan could well benefit both the rich and the middle class, at the cost of national debt, but that remains to be seen.

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TRUMP: As Indiana governor, Mike Pence “signed the largest income tax cut in the state’s history” — Indiana speech introducing the plan.

THE FACTS: True, but it wasn’t much of a cut.

The measure the vice president signed into law as Indiana governor in 2013 took effect in stages, gradually lowering the state’s income tax rate to 3.23 percent this year from 3.4 percent.

That amounts to about $85 in savings a year for someone making $50,000 in taxable income, according to data from Purdue University economist Larry DeBoer, who has studied Indiana tax policy for about 30 years.

The only other income tax cut in state history was a 0.1 percentage point reduction in the 1970s, according to DeBoer’s data. That rate was raised during the 1980s to 3.4 percent — where it remained until Pence won the new cuts.

Overall, Pence’s income tax cut is far from the biggest tax cut in Indiana history. Statewide caps on property taxes enacted under Pence’s predecessor as governor, Mitch Daniels, cut much more.

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SEN. CHUCK SCHUMER, Senate Democratic leader: “Each of those proposals would result in a massive windfall for the wealthiest Americans and provide almost no relief to middle-class taxpayers who need it the most” — Senate remarks.

THE FACTS: “Each” is a stretch, given the scarcity of detail. He’s referring to the proposed elimination of the estate tax, rate cuts on the top tier and on business income reported on personal returns, and an increase in the lowest income tax rate.

But he’s playing without all the cards, just as Trump does when making the opposite argument that the rich won’t benefit. The income levels at which the new tax rates would apply are not specified and there are no credible distribution tables showing how various income groups would fare.

Middle-income people could benefit substantially from lower tax rates and a near doubling of the standard deduction to $12,000 for individuals and $24,000 for families. But they might not, because they would lose many deductions. It depends in large measure on how the tax tables are drawn.

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TRUMP on the estate tax: “The farmers in particular are affected” — Indiana speech.

THE FACTS: That assertion appears to be at odds with statistics. Only 1.7 percent of family-farm estates were required to file an estate-tax return in 2016 and only 0.4 percent ended up owing the tax, according to an analysis by the Agriculture Department. Overall, the very rich are affected in particular.

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Associated Press writer Brian Slodysko in Indianapolis contributed to this report.




Trump, GOP roll out tax plan; cuts rates, doubles deduction

By Marcy Gordon and Andrew Taylor

WASHINGTON, D.C. — President Donald Trump and congressional Republicans are rolling out a wide-ranging plan to cut taxes for individuals and corporations, simplify the tax system, and likely double the standard deduction used by most Americans.

Months in the making, the plan meets a political imperative for Republicans to deliver an overhaul of the U.S. tax code after the failure of the health care repeal.

The public reveal of the plan was set for Wednesday. The day before, details emerged on Capitol Hill while Trump personally appealed to House Republicans and Democrats at the White House to get behind his proposal.

“We will cut taxes tremendously for the middle class. Not just a little bit but tremendously,” Trump said as he met with members of the tax-writing Ways and Means Committee. He predicted jobs “will be coming back in because we have a non-competitive tax structure right now and we’re going to go super competitive.”

President Donald Trump speaks during a meeting with members of the House Ways and Means committee in the Roosevelt Room of the White House, Tuesday, Sept. 26, 2017, in Washington. (Evan Vucci/AP)

Among the details: repeal of the tax on multimillion-dollar estates, a steep reduction in the rate corporations pay from 35 percent to 20 percent and potentially four tax brackets, down from the current seven. The current top rate for individuals, those earning more than $418,000 a year, is 39.6 percent.

The goal, the architects say, is a simpler tax code that would spur economic growth and make U.S. companies more competitive with overseas rivals. Delivering on the top legislative goal will be crucial for Republicans intent on holding onto their congressional majorities in next year’s midterm elections.

The tax overhaul plan assembled by the White House and GOP leaders aims at the first major revamp of the tax system in three decades. It would deliver on a major Trump campaign pledge.

The outlines of the plan were described Tuesday by GOP officials who demanded anonymity to disclose private deliberations.

The plan would likely cut the tax rate for the wealthiest Americans from 39.6 percent to 35 percent. A new surcharge on wealthy taxpayers might soften the appearance of the wealthiest Americans and big corporations benefiting from generous tax cuts.

Republicans already were picking at the framework, pointing up how divisions within GOP ranks can complicate efforts to overhaul taxes as has happened with the series of moves to repeal the Obama health care law.

The White House said Trump planned to point to Indiana as a model for cutting taxes and regulations when he outlines his overhaul plan at the Indiana State Fairgrounds in Indianapolis on Wednesday.

Trump will cite Indiana’s time under Vice President Mike Pence, the state’s former governor, as an example of how a tax revamp can produce economic growth. A senior White House official said Trump will tell supporters that “it’s time for Washington to learn from the wisdom of Indiana.” The official spoke on condition of anonymity ahead of the formal announcement.

President Donald Trump speaks during a meeting with members of the House Ways and Means committee in the Roosevelt Room of the White House, Tuesday, Sept. 26, 2017, in Washington. (Evan Vucci/AP)

The trip will offer a bipartisan flavor as well. Indiana Sen. Joe Donnelly, a Democrat, said he would travel with Trump on Air Force One to the event. Donnelly is running for re-election in 2018 and is a top target for Republicans in next year’s mid-term elections.

The proposal was crafted behind closed doors over months by top White House economic officials, GOP congressional leaders and the Republican heads of tax-writing panels in the House and Senate. Trump and the Republicans were putting the final touches on the plan when the Democrats were brought in. A senior House Democrat saw it as the opening of negotiations.

Trump had previously said he wanted a 15 percent rate for corporations, but House Speaker Paul Ryan has called that impractically low and has said it would risk adding to the soaring $20 trillion national debt.

Trump said Tuesday some of the components included doubling the standard deduction used by individuals and married couples, and increasing the child tax credit. Most Americans would be able to file their taxes on a single page. “We must make our tax code simple and fair. It’s too complicated,” Trump said.

Some conservative GOP lawmakers, meanwhile, dug in their heels on the shape of the plan.

Rep. Mark Meadows, head of the House Freedom Caucus, said he’d vote against legislation if it provided for a corporate tax rate over 20 percent, a rate for small businesses higher than 25 percent, or if it fails to double the standard deduction.

“That’s the red line for me,” Meadows said at a forum of conservative lawmakers. He noted he was speaking personally, not as head of the conservative group.

The Democrats have insisted that any tax relief should go to the middle class, not the wealthiest. Tax cuts shouldn’t add to the ballooning debt, they say.

Rep. Richard Neal of Massachusetts, the top Democrat on the Ways and Means Committee, came away from the White House meeting in a negotiating mood. “This is when the process gets kicked off,” Neal told reporters at the Capitol.

The rate for wealthiest taxpayers shouldn’t be reduced, he said.

Still, there may be room to negotiate over the Republicans’ insistence on repealing the estate tax, Neal indicated, since “there are other things you can do with it” to revise it, short of complete elimination.

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Associated Press writer Ken Thomas contributed to this report.

 




Tax overhaul faces resistance from fans of some deductions

WASHINGTON, D.C. — President Donald Trump and congressional Republicans have pledged to overhaul the nation’s complex tax code. To slash taxes, they say they’ll curb a web of expensive deductions and credits to allow more revenue to flow to the government.

Problem is, they’re likely to run into a wall of resistance from people and groups drawn together by a singular warning: Don’t touch my deduction.

Major cherished tax breaks — from deductions for mortgage interest and charitable donations to incentives for 401(k) contributions — have deep-pocketed supporters and lobbyists who are sure to fight to preserve those benefits. They add up to hundreds of billions of dollars in lost potential revenue that could otherwise go to rebuilding roads and bridges or social programs or even to help finance broader tax cuts for people and companies.

“On every single item, there’s a group out there ready to battle,” says Thomas Cooke, a professor and tax expert at Georgetown University.

(File Photo)

This makes the outlook thorny for a tax rewrite effort this fall, a Trump priority that Republicans consider a political imperative looking ahead to next year’s midterm elections. The collapse of GOP health care legislation raises the stakes for taxes, with Trump’s team offering an ambitious timetable.

“We’re on track to get this done by the end of the year,” Treasury Secretary Steve Mnuchin said Thursday in an interview with CNBC.

The president and the GOP agree on the broad goals: Simplifying the tax code, lowering the rate for corporations from the current 15-35 percent range, and bringing relief for the middle class. But details have to be filled in.

“First, we need a tax code that is simple, fair and easy to understand,” Trump said Wednesday at a rally in Missouri. “That means getting rid of the loopholes and complexity that primarily benefit the wealthiest Americans and special interests.”

Among the seemingly unassailable benefits, the most cherished may well be the deduction of interest paid on mortgages. Touted as a pillar in the promotion of homeownership, the benefit cost the government an estimated $77 billion in the budget year that ended last Sept. 30, according to Congress’ Joint Committee on Taxation.

The benefit allows homeowners to deduct up to $1 million in interest payments on a primary (and a secondary) residence. It is fiercely defended by the National Association of Realtors, which spent $64.8 million on lobbying on various issues last year including the mortgage deduction, according to the Center for Responsive Politics.

Roughly 28 million Americans deduct mortgage interest from their income taxes, with the biggest concentrations in the high housing-cost states of California, New York, New Jersey, Virginia and Maryland, according to the Tax Policy Center, a joint venture of the Urban Institute and the Brookings Institution.

House Republicans say they’ve got a more efficient way to encourage home buying. Under their plan, the standard deduction would be increased from the current $12,600 for married couples filing jointly, for example, to $24,000. They argue that a majority of homeowners would no longer choose to itemize deductions and claim the mortgage-interest benefit. They’d be better off using the bigger standard deduction.

Another possibility is halving the mortgage deduction to $500,000. That would surely set up a pitched battle.

Other highly popular benefits:

—Employees’ earnings from defined-contribution retirement plans such as 401(k)s are not taxed until retirement; pay-ins by both employers and employees also receive tax-preferred status. That cost $82.7 billion in the most recent budget year.

Among the ideas circulating among some Republicans is reversing that by taxing investment earnings upfront, not upon retirement; or reducing the limits on pre-tax contributions.

With about 55 million U.S. workers holding some $5 trillion in their 401(k) accounts, the plans have become a touchstone of retirement security for the middle class.

A coalition of groups representing employers, consumers and the financial industry recently expressed concern to the powerful chairman of the Senate Finance Committee. With lawmakers looking for revenue sources to offset prospective tax cuts, “Any changes to the retirement system made solely for short-term budgetary gains, and not for policy reasons, could hurt Americans’ long-term retirement security,” the Save Our Savings coalition said in a letter to Sen. Orrin Hatch, R-Utah.

—Deductions for donations to charitable, religious and other nonprofit organizations. Estimated cost: $41.5 billion. Americans are generous, House Republicans note, and charitable giving should be encouraged with a tax incentive. But only 25 percent of taxpayers benefit from the deduction because the rest don’t itemize. The solution is to make the charitable deduction more efficient by simplifying taxpayers’ compliance and record-keeping, the Republican plan says.

Under the plan, all itemized deductions would be eliminated except for two: mortgage interest and charitable donations.

—Tax-free employer-paid health insurance premiums and other medical expenses, including long-term care insurance, clocking in at $143.8 billion. Employees aren’t taxed on the benefits, while employers can deduct them as a business expense.

—Tax credit for children under age 17, $55 billion. An individual can claim a $1,000 credit for each qualifying child. The credit starts phasing out for single filers earning over $75,000 a year and for joint filers earning over $110,000.

Some lawmakers have proposed increasing the credit to $2,500, by combining the exemption for dependents and the child care credit. Organizations including the Child Poverty Action Group and the National Association for the Education of Young Children have stressed the importance of using tax policy to help children and families. They express concern that such benefits for children could get caught up in the Republicans’ drive to eliminate “special interest” loopholes in the tax overhaul.

Rep. Kevin Brady, the Texas Republican who heads the tax-writing Ways and Means Committee, acknowledged in a recent speech, “The fight will get tough.”




Trump pushes tax overhaul, says it’s ‘badly needed’

By Catherine Lucey and Josh Boak

WASHINGTON, D.C. — President Donald Trump will kick off his lobbying effort for a tax overhaul at an event with a Midwestern manufacturing backdrop and some economic tough talk.

The one thing missing? A detailed proposal.

Instead, in Springfield, Missouri, Wednesday, Trump will give remarks that the White House said will focus on his “vision” for spurring job creation and economic growth by cutting rates and revising the tax code. Details will come later, officials said, when lawmakers work them out.

President Donald Trump and first lady Melania Trump arrive on Air Force One at Austin-Bergstrom International Airport in Austin, Texas, Tuesday, Aug. 29, 2017, wldfor briefings on Harvey relief efforts. (Evan Vucci/AP)

After a year with no major legislative wins, the stakes are high for the White House and GOP leaders, who face mounting pressure to get points on the board before next year’s midterm elections. Complicating matters, the tax push comes amid an intense September workload that requires Congress to act by month’s end to fund the government and raise the debt limit, as well as pass emergency spending for the Harvey disaster.

After failing to deliver on seven years of promises to repeal and replace Obamacare, many Republicans believe they must produce on taxes or face a reckoning in next year’s congressional midterm elections. If they don’t have something to show for full control of Congress and the White House, voters could try to take it all away, beginning with the GOP’s House majority.

On Twitter Sunday, Trump previewed his trip, stressing the politics. Calling Missouri a “wonderful state,” he said the state’s Democratic Sen. Claire McCaskill — up for re-election next year — is “opposed to big tax cuts” and said a “Republican will win” the state.

“Will be leaving for Missouri soon for a speech on tax cuts and tax reform – so badly needed!” he tweeted Wednesday morning.

Trump is kicking the effort off in Springfield, considered the birthplace of the historic Route 66 highway, known as “America’s Main Street.” Emphasizing domestic jobs, he’s appearing at the Loren Cook Company, which manufactures fans, gravity vents, laboratory exhaust systems and energy recovery ventilators.

A key challenge is to frame a tax plan that could include cuts for corporations and top earners as a boon for the middle class. Officials suggested Trump would argue that cutting business taxes will benefit American companies and workers. The remarks were drafted by Trump policy adviser Stephen Miller with the speechwriting team, under Trump’s guidance, the White House said.

Trump will be joined by Treasury Secretary Steven Mnuchin, Commerce Secretary Wilbur Ross, Gary Cohn, director of the National Economic Council, and Small Business Administrator Linda McMahon, said the White House. Also expected are Missouri elected officials, including Sen. Roy Blunt and Gov. Eric Greitens, as well as local business owners.

Trump is expected to continue his sales pitch and Republicans are hoping the president commits in a way he never did for health care.

“If you’re a Republican, you have to be encouraged by the president’s recent focus on tax reform,” said Brian McGuire, former chief of staff to Senate Majority Leader Mitch McConnell. “Not only does presidential leadership make the chances of success here far more likely, it could also very well be the difference between Donald Trump presiding over a jobs boom and Nancy Pelosi presiding over an impeachment trial.”

But in order to clear their other priorities and focus to rewriting the tax code, Congress will need a steady partner in the White House, something that’s been sorely lacking from Trump thus far. If the president chooses to renew fights with key lawmakers like McConnell or double down on contentious issues like funding his border wall, which he’s already threatened to shut down the government to achieve, that could only hurt chances of reaching success on taxes.

“He’s a liability,” said Republican consultant Rick Tyler. “He proved that in the whole health care repeal and replace. He just can’t stay focused on one thing.”

The Trump administration released a one-page set of goals in April, followed by a joint statement in July with congressional leaders. In an interview with the Financial Times last week, Cohn said the White House and GOP leaders have agreed on a “good skeleton” for a tax overhaul, and said the House tax-writing committee would be drafting legislation while the White House tries to sell the plan.

Republican House Speaker Paul Ryan touted tax reform efforts during an appearance in suburban Seattle last week. He pledged to simplify the code, calling it “the worst, the least competitive tax system in the industrialized world.”

White House officials declined to discuss details Tuesday. Trump has promised the largest tax cut ever, saying he’d like to see the corporate tax rate drop from a top tax rate of 35 percent to a top rate of 15 percent. But it’s not clear if it will end up being that low in the plan. It is also not clear what kind of break a typical taxpayer will see.

Cohn told the Financial Times a bill could be passed in the House and Senate by year’s end, pushing back the administration’s timetable for a bill to reach the president’s desk. The White House had said previously that it expected final passage in November.

Cohn said that if Democrats are not interested in working together, they will pursue legislation using a maneuver that only requires Republican votes.

Democrats have already gone on the attack. Democratic House Minority Leader Nancy Pelosi said on Twitter recently that House Speaker Paul Ryan’s “tax plan is not reform — it’s a tax cut for billionaires.”

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AP Congressional Correspondent Erica Werner contributed to this report.




Senate Dems talk bipartisan on taxes with conditions

By Andrew Taylor

WASHINGTON, D.C. —

 Senate Democrats and independents said Tuesday that upcoming legislation to rewrite the nation’s tax code should ensure the middle class doesn’t pay more and the “top 1 percent” doesn’t pay less.

In a letter to Republican leaders, including President Donald Trump, 45 of the 48 Senate Democratic caucus members said they won’t support any upcoming GOP effort to overhaul the tax system that delivers cuts to the top 1 percent or adds to the government’s $20 trillion debt.

Republicans controlling Congress are gearing up to advance their tax measure this fall, promising to lower rates on businesses and individuals, while clearing out many tax breaks and deductions.

The letter says that Democrats hope to work with Republicans to promote investment and modernize the outdated tax code, but the terms laid out by Democrats are unlikely to tempt Republicans, who are planning to use a filibuster-proof Senate procedure to advance the legislation without their help.

“Any tax reform effort should not benefit the wealthiest individuals, who have already seen outsized benefits from recent economic gains,” said the letter, authored by Minority Leader Chuck Schumer, D-N.Y., and others and provided to the media. “Tax reform cannot be a cover story for delivering tax cuts to the wealthiest.”

The contours of the GOP tax plan are fuzzy at best, but House Speaker Paul Ryan, R-Wis., says he’s not pressing for a large, deficit-financed tax measure. But keeping GOP promises for large rate cuts won’t be easy under those conditions, given the difficulty in eliminating popular deductions and tax breaks.

The most recent successful tax reform effort was in 1986 and required a bipartisan push to overcome opposition from powerful interest groups.

Sen. Roy Blunt, R-Mo., a member of the GOP leadership team, said after the collapse on health care, lawmakers need to “see if we can’t put some wins on the board and certainly tax reform, infrastructure are the kinds of things we ought to be looking at.”

He argued that tax reform would be easier “because it’s about revenue but there’s nothing wrong with looking at what the options are in terms of a long-term permanent tax cut as opposed to a short term if that’s possible.”

GOP leaders also intend to reject another Democratic demand: advancing the measure under regular legislative procedures instead of through the planned fast-track path.

Three Democrats from states easily carried by President Donald Trump – Joe Manchin of West Virginia, Joe Donnelly of Indiana, and Heidi Heitkamp of North Dakota – did not sign the letter. Each of the three is up for re-election.

In Tuesday floor remarks, Schumer said that tax reform should focus on increasing “wages for working families, improving middle class job growth, promoting domestic investment while modernizing our outdated business and international tax system.”

Added Schumer: “From what we’ve heard from the White House so far, their plan wouldn’t do any of that.”

Separately, Schumer, Treasury Secretary Mnuchin and Majority Leader Mitch McConnell, R-Ky., met on Tuesday morning on Capitol Hill.

“As I’ve said before tax reform is a major priority of ours and we will be proceeding with it,” Mnuchin said after the meeting.

In this May 5, 2014, file photo, the Capitol building is seen through the columns on the steps of the Supreme Court in Washington. (Carolyn Kaster, File/AP)

 




GOP favor dropping tax beneficial to blue states

By Stephen Ohlemacher

WASHINGTON, D.C. — Republicans aren’t usually big on raising taxes, but they’re really eager to eliminate the federal deduction for state and local taxes.

Why? A look at the states that benefit the most from the tax break helps explain it — they are all Democratic strongholds, or so-called blue states. New York, Connecticut, New Jersey and California top the list of states where taxpayers get the biggest deductions. Not a single Republican-leaning state ranks in the top 10.

“Although Republicans usually recoil at any type of tax increase, cutting this tax break would almost be fun for them,” said Martin Sullivan, chief economist for Tax Analysts. “It provides massively disproportionate deductions to high-tax states controlled by Democrats.”

(AP Graph)

Proposals by House Republican leaders and President Donald Trump would repeal the tax break as part of their packages to overhaul the American tax code. But they are getting a lot of pushback from Republican lawmakers in Democratic-controlled states.

The standoff illustrates how hard it is for Congress to eliminate any popular tax break, even one that primarily benefits the ruling party’s political opponents.

Almost 44 million people claimed the deduction in 2014, according to IRS statistics. That’s nearly every taxpayer who itemizes deductions, a little less than 30 percent of all taxpayers. Sullivan analyzed which states would be hit hardest by repealing the tax deduction. The Associated Press did a similar analysis and came to the same conclusion.

Nationally, the average deduction is about $11,800, but it is much bigger in many blue states. New York is tops with an average deduction of more than $21,000. Connecticut is next at $18,900, followed by New Jersey at $17,200 and California at $17,100.

These are states with high property values, high costs of living, high incomes and relatively high state and local taxes compared to other states. They are also states President Donald Trump lost in last year’s election. Though the president is from New York, he lost the state to Democrat Hillary Clinton by 22 percentage points.

The highest-ranked state won by Trump is Wisconsin, which came in at No. 13, with an average deduction of $11,300.

At the bottom is Alaska, with an average deduction of $4,800. It is followed by Tennessee and Alabama. Among the bottom 10 states, Nevada and New Mexico are the only ones won by Clinton.

The deduction allows taxpayers to write off real estate taxes, and state and local income taxes. If your state doesn’t have an income tax, you can deduct sales taxes. The deduction is heavily weighted to families with high incomes. Seventy-five percent of the benefits went to families making more than $100,000.

Rep. Kevin Brady, R-Texas, says eliminating a tax break that helps some people will help lawmakers lower tax rates for everyone.

“We’re proposing a much simpler code with lower rates where everyone gets help whether they are paying their state and local taxes or they are putting their kids in college,” said Brady, who chairs the tax-writing House Ways and Means Committee.

Eliminating the tax break would raise $1.3 trillion over the next decade, according to the nonpartisan Tax Policy Center, money that could be used to help pay for lower income tax rates.

The House Republican plan would eliminate most itemized deductions while nearly doubling the standard deduction, to $24,000 for married couples. Notably, the plan would keep the deductions for mortgage interest and charitable contributions.

The White House and congressional Republicans have been privately negotiating their tax package for weeks, with no public sign that they’re near a consensus. Democrats have been excluded from the talks.

Some Republicans claim the deduction for state and local taxes encourages states to spend and tax more because the taxes can be deducted at the federal level. Some also complain that the deduction forces low-tax Republican states — red states — to subsidize high taxes in Democratic states.

However, many blue-state Republicans don’t buy those arguments. They note that most high-cost blue states send more tax dollars to Washington than they receive in federal benefits. And who benefits from those tax dollars? Low-cost red states where incomes are generally lower.

“If we’re going to have a discussion about who is subsidizing whom, it must be across the board. It can’t be just one provision,” said Rep. Leonard Lance, R-N.J.

Lance is teaming up with Rep. Bill Pascrell, Jr., D-N.J., in an effort to maintain the tax break.

“In New Jersey, (the deduction) encourages very strong public schools,” Lance said. “I want to maintain strong public schools. For there to be strong public schools, there has to be adequate spending.”

Rep. Tom MacArthur, R-N.J., said he brings up the deduction every time he sees Treasury Secretary Steven Mnuchin, one of Trump’s top advisers on taxes.

“The minute he walked into the room and saw me he pointed and said, ‘I know, state and local tax deduction,’” MacArthur said.

“I know the White House is committed to bringing taxes down for everybody,” MacArthur said. “But people in high-tax states under the plan they’re proposing would basically be at a break-even while everyone else in the county enjoys tax relief. That’s not fair.”