A tough start for GOP in a high-stakes week

WASHINGTON (AP) — The White House and congressional Republicans are finalizing a tax plan that would slash the corporate rate while likely reducing the levy for the wealthiest Americans, with President Donald Trump ready to roll out the policy proposal at midweek.

The grand plan to rewrite the nation’s tax code would be the first major overhaul in three decades, delivering on a Trump campaign pledge and providing a sorely needed legislative achievement. It also is expected to eliminate or reduce some tax breaks and deductions.

The plan would likely cut the tax rate for the wealthiest Americans, now at 39.6 percent, to 35 percent, people familiar with the plan said Monday. They spoke on condition of anonymity ahead of a formal announcement.

In addition, the top tax for corporations would be reduced to around 20 percent from the current 35 percent, they said. It will seek to simply the tax system by reducing the number of income tax brackets from seven to three.

Trump has said he wanted to see 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.

The White House and congressional leaders planned an all-out blitz later this week to build support for the plan, which is now Trump’s top legislative priority as the GOP has struggled to repeal and replace Democrat Barack Obama’s health care law. The political stakes are high for Trump, who has promised to bring 3 percent economic growth and expanded jobs through tax cuts.

Vice President Mike Pence was expected to hold events in Michigan and Wisconsin on Thursday to promote the tax plan with business leaders.

The plan being assembled lays out “pro-growth tax reform,” Rep. Kevin Brady, R-Texas, head of the tax-writing House Ways and Means Committee, told reporters on Capitol Hill. It will fix a tax code that is “so complex, so costly and so unfair,” he said.

Brady predicted the plan “will deliver the lowest tax rates on businesses in modern history.”

Details will be filled in later by the committee, and legislation will be put forward after the House and Senate enact their budget frameworks, Brady said.

Republicans are divided over the potential elimination of some of the deductions, underscoring the difficulty of overhauling the tax code even with GOP control of the House and Senate.

House Republicans planned to hold a Wednesday retreat at Fort McNair, Maryland, a few miles from the White House, to discuss the proposal, with briefings led by Brady and Rep. Peter Roskam, R-Ill.

Trump planned to address the plan in a speech the same day at the Indiana State Fairgrounds in Indianapolis. Cabinet members and other top administration officials were fanning out on Thursday to talk about the benefits of overhauling the tax system.

“The tax reform I think is very critical and he knows that,” said Christopher Ruddy, the CEO of NewsMax and a longtime Trump friend. “And that’s why he’ll push really hard for it. But he’s got something big going for him here. The Republicans need to run on something next year and it’s tax cuts. So even if they don’t want to be particularly helpful to him, I think they’re going to give him this. If he has the tax cuts signed, I think it’s going to be very helpful for him.”

Touching with his conservative base, Trump planned to discuss the tax plan at dinner Monday night with representatives of several conservative, religious and anti-abortion groups.

Outside Republican groups and business interests are also planning a major push to advocate for the tax framework.

Corry Bliss, the executive director of the American Action Network, a conservative advocacy group, said it planned to spend $12 million — atop the $8 million it spent laying the groundwork for the tax overhaul — to help win passage of the plan.

“There’s an understanding among outside groups, among members, among Republicans across the country that there is a desperate need to cut middle-class taxes,” Bliss said, noting “excitement and relief” among outside groups that it was “finally time” to push the tax package in Congress.

Republicans control Congress but they are split on some core tax issues. They’re in agreement on wanting to cut tax rates and simplify the byzantine tax system but they’re divided over whether to add to the government’s ballooning debt with tax cuts. The GOP also is at odds over eliminating the federal deduction for state and local taxes.

That deduction is prominently in the sights of the plan’s architects. Treasury Secretary Steven Mnuchin says the administration wants to eliminate or reduce it because the federal government shouldn’t be subsidizing states and wealthy households. Nearly 44 million people claimed the deduction for state and local taxes in 2014, according to the most recent IRS tally, especially in the high-tax, high-income states of California, New York, New Jersey and Connecticut.

Politics figure heavily. There are a host of GOP lawmakers in those four Democratic-controlled “blue” states — including prominent members like House Majority Leader Kevin McCarthy of California. A number of them are pushing back.

Regardless of what the administration and the House GOP come up with on taxes, Sen. Orrin Hatch, the Utah Republican who heads the tax-writing Senate Finance Committee, has warned that his panel won’t be “a rubber stamp” for the plan.

Republican senators on opposing sides of the deficit debate have tentatively agreed on a plan for $1.5 trillion in tax cuts. That would add substantially to the debt and would enable deeper cuts to tax rates than would be allowed if Republicans followed through on earlier promises that their tax overhaul wouldn’t add to the budget deficit. That would mark an about-face for top congressional Republicans like Ryan and Senate Majority Leader Mitch McConnell, who had for months promised it wouldn’t add to the deficit.

Source: www.apnews.com

By MARCY GORDON and KEN THOMAS