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After delay, Republicans in Congress prepare to introduce tax bill

Key Points
  • Republicans in the U.S. House of Representatives were expected on Thursday to release a tax bill offering plenty of flexibility.
  • Lawmakers are grappling with stubborn internal disagreements on paying for the tax cuts they propose.
  • GOP leaders have made plans for a measure that will seek up to $6 trillion in tax cuts over 10 years.
GOP lawmakers set to unveil tax plan

Republicans in the U.S. House of Representatives were expected on Thursday to release a tax bill offering plenty of flexibility, as they grapple with stubborn internal disagreements on paying for the tax cuts they propose.

After an embarrassing one-day postponement of the bill's unveiling on Wednesday, lawmakers have made plans for a measure that will seek up to $6 trillion in tax cuts over 10 years but likely not spell out completely how to offset them.

Asked if the bill would contain a permanent corporate tax rate cut to 20 percent from 35 percent, U.S. House of Representatives tax panel Chairman Kevin Brady told reporters: "That's our goal and I think it's going to take several steps ... to achieve that."

Lobbyists said Republicans were having trouble reaching consensus on where to find revenue to pay for tax cuts and would likely have to make the corporate cut temporary as a result.

After a White House meeting with advisers, President Donald Trump told reporters: "Sometime tomorrow, we'll be announcing massive tax cuts and reform."

House Republican leaders and tax panel members were slated to meet with Trump at the White House on Thursday afternoon.

From mortgage interest and 401(k) retirement plans to the federal deficit and state and local taxes, numerous unanswered questions swirled around the tax-cut plan as lawmakers met into the evening on Capitol Hill.

Representative Tom MacArthur, asked if fellow Republicans could meet their ambitious deadline of approving a tax bill by the Nov. 23 Thanksgiving holiday, told reporters: "I've been called a lot of things but 'prophet' is not one of them."

Since taking over Congress and the White House in January, the Republicans and Trump have yet to score a major legislative accomplishment. That will change, they say, when they overhaul the tax code for the first time in 31 years.

But they are fast discovering why every attempt to do that has failed since former Republican President Ronald Reagan's historic tax reform in 1986.

Unlike the nearly three-year Reagan effort involving public hearings and bipartisan cooperation, the Trump tax plan was developed in secret over a few months by six senior lawmakers and White House advisers who took little input from rank-and-file Republicans and largely ignored the Democrats.

House Democratic Leader Nancy Pelosi said in a statement that the "chaotic delay" of the tax bill's release showed Republicans were "pushing a half-baked tax bill with ruinous consequences for workers and middle-class Americans."

Stumbling blocks

MacArthur said the plan's biggest challenge was a proposed elimination of a deduction for state and local tax (SALT) payments, which is among several revenue-raising changes meant to offset proposed tax cuts. Other lawmakers and lobbyists cited different concerns with the bill.

Republicans from high-tax states where upper-middle-class voters would be hardest hit by the SALT deduction repeal were unsure if the bill on Thursday would address their concerns.

Representative Lee Zeldin from New York said he wanted "major changes" to preserve state and local tax deductibility. "I was encouraged when I heard Chairman Brady refer to the draft that's about to get released as not being the final text," said Zeldin.

MacArthur, from New Jersey, said a compromise proposal being worked on to maintain and cap the deductibility of property tax payments was a good start but the cap would need to be raised to earn his support.

Trump, largely playing cheerleader in the debate, tweeted advice on paying for the cuts. "Wouldn't it be great to Repeal the very unfair and unpopular Individual Mandate in ObamaCare and use those savings for further Tax Cuts," he said in a Twitter post.

Afterward, White House spokeswoman Sarah Sanders told reporters that the administration still wanted to repeal and replace Obamacare, but "we still think it's probably more likely to do something like that in the spring."

An attempt to dismantle former Democratic President Barack Obama's Affordable Care Act, popularly known as Obamacare, failed dramatically in the Republican-controlled Senate in July.

401(k) in play

Another contentious revenue-raising proposal in the plan is to limit how much money Americans can put into their 401(k) retirement accounts and individual retirement accounts (IRAs) on a pre-tax basis.

There was also a proposal to limit the deductibility of interest payments by businesses. Restrictions are opposed by businesses with little access to equity financing, including farmers, ranchers, and small businesses.

A rough framework of the tax plan was unveiled in late September, but its basic components were changing.

It originally called for reducing the number of tax brackets to three from seven, with the current top tax rate of 39.6 percent reduced to 35 percent, a win for high-income taxpayers.

Partly in response to Democrats who dismissed the plan as a giveaway to corporations and the wealthy, lawmakers are expected to restore a fourth 39.6 percent tax bracket but increase the income level where it applies, perhaps to $1 million, more than double the current level.

Questions remained about the original framework's proposal to repeal the estate tax on inheritances, another policy change that would favor wealthy Americans. A discussion was ongoing about possibly phasing it out.

Lawmakers also have not resolved a challenge posed by Trump's plan to lower the tax rate on pass-through enterprises, such as partnerships and sole proprietorships, to 25 percent from as high as 39.6 percent, they said.