House Republicans are unveiling a draft tax bill on Thursday, calling for deep cuts in both individual and corporate tax rates.
The roll out, originally scheduled for Wednesday, was postponed to give bill drafters more time. They’re still struggling to find sufficient revenue to avoid a budget-busting score. As a result, some of the tax changes have been made temporary or phased in over time. Details of the plan were obtained in documents verified to NPR by a GOP congressional source.
The plan also leaves intact a top individual tax rate of 39.6 percent, to address charges that the cuts are unduly favorable to the rich. The bill would raise the income threshold at which the top tax rate would apply. In a boost for the wealthy, the plan also eliminates the alternative minimum tax and phases out the estate tax over a period of years.
Broadly speaking the GOP bill would sharply reduce taxes on both individuals and corporations, potentially draining trillions of dollars from federal coffers over the next decade. The Republican budget, however, makes room for only $1.5 trillion in revenue reduction over that period. And fast-track Senate rules, designed to avoid a Democratic filibuster, say the bill can’t add to the deficit beyond 10 years.
Republicans hope to offset some of the lost revenue from lower tax rates by closing loopholes elsewhere in the tax code. But that’s politically challenging. Two of the costliest tax breaks — for mortgage interest and gifts to charity — were declared off-limits at the outset, although the draft plan limits the mortgage deduction on future home purchases to loans of $500,000, down from the current $1 million. Efforts to curtail other popular breaks — for retirement savings and state and local taxes — have faced pushback from the White House and Republicans in high-tax states.
The compromise released by the House Ways and Means Committee would reduce the number of individual tax rates from seven to four: 12 percent, 25 percent, 35 percent and 39.6 percent. The bill also doubles the standard deduction, which will make tax-filing easier for some people. However, it eliminates personal exemptions, which could adversely affect larger families.
As expected, the corporate tax rate would drop from 35 percent to 20 percent. And the bill would establish a lower tax rate of 25 percent for so-called “pass through” businesses such as partnerships that currently pay taxes at their owners’ individual rate.
Multinational corporations would no longer be taxed on profits earned overseas, although the plan would establish a minimum tax rate of 10 percent on foreign subsidiaries.