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UPDATE 1-Trump tax drive nears major milestone as U.S. House readies bill

(Adds timing of bill's release, Trump meetings with Republicans)

WASHINGTON, Nov 2 (Reuters) - President Donald Trump's drive to overhaul the U.S. tax system will reach a major milestone on Thursday, when Republicans in the House of Representatives unveil their long-awaited initial legislation.

The bill will be the starting gun for a frantic race toward what Trump and his fellow Republicans in the House and Senate hope will be their first major legislative victory: the enactment this year of a package with up to $6 trillion in tax cuts over the next decade for corporations, small businesses and individuals.

Congress has not succeeded on comprehensive tax changes since 1986, when Ronald Reagan was in the White House and Democrats controlled the House.

Trump said at the White House this week that he wanted Congress to pass the tax overhaul by the U.S. Thanksgiving holiday on Nov. 23.

The House Ways and Means Committee has been drafting the bill, and Chairman Kevin Brady has promised to release it on Thursday. A spokesman for House Speaker Paul Ryan said it would be made public at 11:15 a.m. (1515 GMT).

Trump, House Republican leaders and Republican members of Brady's panel will then meet at the White House on Thursday afternoon. Trump is also meeting separately with Republican senators, who must also unite to pass the tax plan.

Still, important issues remain unresolved and Brady himself predicts the initial legislation will change next week, when his panel is due to begin preparing it for an eventual House vote.

As Brady's panel met late into Wednesday evening to review final details of the tax package, questions remained about how to handle 401(k) retirement plans and mortgage interest, a federal deduction for state and local taxes, and the plan's projected impact on the federal deficit.

"We're going to make improvements at every step," Brady said as he left the meeting.

The bill is expected to contain a compromise that could remove one of the plan's biggest obstacles, the proposed elimination of a deduction for payments of state and local taxes, or SALT. The compromise would preserve the deduction for property taxes, but not income tax payments.

Lawmakers from high-tax states such as New Jersey, New York and California, where upper middle-class voters would be hardest hit by removing the SALT deduction, have expressed varying degrees of confidence about the compromise.

Representative Tom MacArthur of New Jersey said his staff was calculating home prices in his district to determine what the cap should be for the property-tax deduction. "I think it needs to go up," he told Reuters.

Representative Lee Zeldin of New York, who favors keeping the full SALT deduction, said on Wednesday the SALT proposals still needed "major changes."

The House bill will also cut the top corporate income tax rate to 20 percent from 35 percent, probably in several steps, Brady said.

The bill is also expected to phase out the estate tax paid by the wealthiest people, keep a top individual tax rate of 39.6 percent and set a repatriation rate for U.S. businesses with profits overseas, according to sources familiar with the negotiations. It will also establish a new rate for "pass-through" businesses such as sole proprietorships, partnerships and S-corporations, they said.

The bill must also pass the Senate, where Republicans hold a slimmer 52-48 majority and earlier this year failed to garner enough votes to pass a major healthcare overhaul. Senate Republican leaders have said they aim to finish their work on taxes by year-end.

Democrats, largely ignored in the legislative process, have criticized Republican's planned tax cuts as a giveaway to corporations and the wealthy that would harm workers and middle-class Americans. (Reporting by Amanda Becker and David Morgan; Additional reporting by Susan Heavey; Editing by Larry King and Lisa Von Ahn)