Republicans unveil sweeping tax bill

Senate Republicans revealed the details of their sweeping tax legislation, including a one-year delay in plans for a major corporate tax cut despite strident opposition from the White House and others in their own party.

Their bill would leave the prized mortgage interest deduction untouched for homeowners in a concession to the powerful real estate lobby but would ignore a House compromise on the hot-button issue of state and local tax deductions.

On the other side of the Capitol, the House Ways and Means Committee approved its own version of the legislation on a party-line 24-16 vote, amid intense political pressure on the GOP to push forward on the first major rewrite of the US tax code in three decades. It's President Donald Trump's top priority and a goal many Republicans believe has grown even more urgent in the wake of election losses on Tuesday that displayed an energised Democratic electorate.

Yet as the Senate Finance Committee unveiled its bill, a few stark differences emerged with the version approved by the House tax-writing committee, underscoring the challenges ahead in getting both chambers to agree on the complex and far-reaching legislation that would affect nearly every American.

The Senate measure fails to repeal the estate tax, though it doubles the size of estates exempted from the tax. It makes couples earning up to $1 million eligible for a $1,650 per-child tax credit. It creates a new 38.5 per cent tax bracket for couples earning more than $1 million and individuals making more than $500,000 per year. And it takes a different approach to cutting taxes for businesses not organised as corporations that is less generous but applies to more businesses. Democrats are strongly opposed to the GOP rewrite, so the Republicans must find agreement among themselves to have any hope of passage.

The Senate bill would fully repeal the state and local deduction claimed by many taxpayers, an idea that has drawn vigorous opposition from House Republicans in New York and New Jersey and resulted in a compromise in the House version of the bill that would allow property taxes to be deducted up to $10,000.

House Majority Leader Kevin McCarthy told The Associated Press that the Senate's total-repeal approach would face tough sledding in his chamber. As for the hard-fought compromise, he said, "I think it'd be difficult not to have it in the final bill."

On the other hand, the House bill would lower the cap on the mortgage interest deduction, an idea that caused intense blowback from the real estate lobby, but the Senate tax measure would leave it unchanged. That means homebuyers would continue to be able to deduct interest payments on loans of up to $1 million as permitted under current law; the House bill would reduce the limit to $500,000 for new home purchases. The feverish efforts by Republicans in both chambers are aimed at fulfilling a self-imposed deadline to get legislation out of the House and Senate before Thanksgiving so the period between then and Christmas can be devoted to reconciling the two versions. But the Senate already seems unlikely to meet that deadline because of complex rules governing how it must consider the tax bill.

In one provision sure to cause a major dispute, the Senate measure includes a one-year delay in lowering the corporate tax rate, which is to be cut from 35 per cent to 20 per cent. Delaying that reduction would lower the cost of the bill to the Treasury, but the delay is opposed by the White House and some Senate Republicans. "The president would like this to go into effect right away," Treasury Secretary Steven Mnuchin said on Thursday on Fox Business Network.

Other obstacles remain, among them a band of deficit hawks in the Senate who are unhappy about the $1.5 trillion the legislation would add to the national debt over the coming decade. "I remain concerned over how the current tax reform proposals will grow the already staggering national debt by opting for short-term fixes while ignoring long-term problems," said Senator Jeff Flake. "We must achieve real tax reform crafted in a fiscally responsible manner."

The House and Senate bills are broadly similar in their outlines. Both would drastically reduce the corporate tax rate and also lower rates for individuals, while eliminating deductions claimed by many people.

The House version would collapse the current seven tax brackets into four, while the Senate would retain seven. The House bill would entirely eliminate the estate tax, while the Senate version would retain it while doubling the exemption level. Both versions would retain an adoption tax credit that had initially been eliminated in the House bill, but that adoption advocates fought to restore.

Both would increase a child tax credit, though not to levels sought by Senators Marco Rubio and others, an indication of how individual provisions will need to be negotiated with one lawmaker after another in the weeks to come. House Republicans appear on track to pass their version of the bill next week, but in the Senate Majority Leader Mitch McConnell has a slim 52-48 majority that has proven difficult to corral.

Democrats are angrily opposed to the GOP rewrite, arguing it's a giveaway to the rich and corporate America. Republicans contend that the tax reductions will help the middle class, even though some independent analyses have found that the wealthy and corporations benefit disproportionately.

The tax bill must deepen federal deficits by no more than $1.5 trillion over the coming decade. If Republicans don't meet that, the measure would be vulnerable to a bill-killing Senate filibuster by Democrats that GOP senators lack the votes to block. It also cannot add to red ink beyond the first 10 years without facing the same fate.

Source: Khaleej Times