GOP Tax Plan to Allow for Top Individual Rate Above 35%

Republicans May Not Be Able to Go It Alone on Tax Reform                 

     

     REUTERS  Carlos Barria

President Trump called on members of both parties to pass his "historic tax reform and tax cuts". Some elements of the plan included doubling the standard deduction used by individuals and married couples and increasing the child tax credit.

Trump has said he wanted a 15 percent rate for corporations.

The Republican tax plan being released Wednesday will open the door to a top individual tax rate that is higher than the 35% that has been in previous plans, according to two people familiar with the discussions.

The framework is the product of the so-called Big Six of US policy makers on taxes: House Ways and Means Chairman Kevin Brady (R., Texas), Senate Finance Chairman Orrin Hatch (R., Utah), Treasury Secretary Steven Mnuchin, White House economic policy chief Gary Cohn, Senate Majority Leader Mitch McConnell (R., Ky.) and House Speaker Paul Ryan (R., Wis.).

Trump has said the tax overhaul would provide tax relief to middle-class Americans, and the White House said that under the proposal typical middle-class families would have less of their income subject to federal income tax.

The poll, sponsored by a nonprofit outside group aligned with House Speaker Paul Ryan, found that almost three-fourths of voters consider tax reform an important priority for lawmakers, with 43 percent calling it a top priority. The framework gives tax legislators the "flexibility" to add a fourth rate above 35% to ensure reform keeps the tax code at least as progressive as the current system.

"This framework is a giant step for a stronger economy, and more jobs and higher wages for the American people", said Freedom Partners Vice President of Policy Nathan Nascimento.

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Republicans proposed eliminating some existing tax deductions, though they retain deductions for mortgage interest payments and charitable deductions.

The House Freedom Caucus endorsement is noteworthy because it could ease House passage of a budget plan that's the first step to advancing the tax cut measure through Congress.

Republicans are preparing to release the framework of their tax reform proposal on Wednesday, the result of months of work by congressional leaders and the Trump administration. They proposed scrapping the deduction for the amount a taxpayer pays in state and local taxes, which could hurt people in high-tax states including California and NY that tend to vote Democratic. It will be left to Congress to create safeguards that prevent wealthy individuals from incorporating as pass-through businesses, which would tax their income at a lower rate.

One of those provisions is the elimination of the alternative minimum tax, or AMT. "Not just a little bit, but tremendously", Trump told reporters at the White House on Tuesday after meeting with Republicans and Democrats on the tax-writing House Ways and Means Committee.

The new plan doesn't list the income brackets for the new rates.

On Wednesday, the President and the "Big Six" group of Republican tax strategists introduced the latest iteration of their plan to overhaul the American tax system. They would pay at a 25 percent rate, down 39.6 percent.

Earlier Sunday, Treasury Secretary Steven Mnuchin said in a television interview the plan "creates a middle-income tax cut, it makes businesses competitive and it creates jobs". It is an attempt to assuage the demand for lower taxes among wealthy party donors without being perceived by Trump's working-class base as giving a windfall to the rich.

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