attacks@ (Adds Tax Policy Center's analysis in paragraphs 8-9)
WASHINGTON, Nov 6 (Reuters) - Republican lawmakers on Monday began revising their proposed overhaul of the U.S. tax code, as Democrats pointed to the loss of popular deductions as proof the legislation was an assault on the middle class.
A draft bill unveiled last week by Republicans in the House of Representatives, if enacted, would be the biggest restructuring of the tax system since the 1980s and the first major legislative victory of the Trump presidency.
Although Republicans generally support the bill's broader themes, including a sharp cut in the corporate income tax, there are rumblings of dissent over other elements, including repeal of the deduction for state and local income tax (SALT) payments.
New York, California and other high-tax states would be hard hit by the removal of that deduction, a fact seized upon by Democrats to bolster their argument that Trump's plan is a gift to the wealthiest Americans and the corporate sector.
"There are a lot of people expecting a tax cut who will be big losers under this bill," Representative Bill Pascrell of New Jersey, a Democrat on the House Ways and Means Committee, said as the tax-writing panel convened to consider the bill.
The White House argues that tax cuts are needed to boost economic growth and create jobs.
The linchpin of the plan is the reduction of the corporate tax rate to 20 percent from 35 percent and establishment of a 25 percent tax rate for "pass through" businesses, which currently pay income tax rates as high as 39.6 percent.
An analysis of the plan released on Monday by the nonpartisan Tax Policy Center found that the wealthy would be the biggest beneficiaries, while more than one-quarter of taxpayers would see a tax hike over 10 years.
The top 1 percent of earners, with annual incomes of more than $730,000, would receive a $37,000 tax cut, representing 22 percent of the total tax cut for individuals in 2018. By 2027, they would get 50 percent of the total benefit, according to the analysis.
With Democrats united in opposition to the plan, Republican defections from a few traditionally Democratic-leaning states could be enough to torpedo it in the House.
Republican Representative Kevin Brady, chairman of the House tax-writing panel, pledged that lawmakers would have a chance to propose changes to the bill. "Let me assure you this is the beginning of the tax reform process," he told the committee.
Brady has already agreed to retain the deduction for property tax payments up to a cap of $10,000 as part of a SALT compromise and has said he would be open to raising it.
In an interview with CNBC on Monday, Brady said another change would be a "carried interest" provision that lengthened to two years the time assets need to be held in order to be eligible for a lower tax rate.
Carried interest is a share of an investment fund's profits typically about 20 percent beyond the return guaranteed to investors that goes to the general partners of private equity, venture capital and hedge funds.
Under current law, high-income fund partners pay the long-term capital gains rate of 20 percent on their carried interest income, instead of the 39.6 percent individual tax rate that applies to the ordinary wage income of high earners.
President Donald Trump promised to close the loophole, which has benefited some of Wall Street's wealthiest financiers.
EYES ON SENATE
Securing congressional passage of the tax plan is critically important to Trump, who has yet to get major legislation through Congress since taking office in January, including a healthcare overhaul he promised as a candidate last year.
Investors are adding to the pressure. The expectation of deep tax cuts has helped fuel a stock market rally during Trump's time as president, with the broad S&P 500 index up about 14 percent.
The Senate, where Republicans have a 52-48 majority, is developing its own version of the tax legislation, which would have to eventually be reconciled with the House version before it is sent to Trump for signing.
Several Republican senators have said they would have a problem voting for any tax bill that significantly increased the deficit. The House bill is projected to add $1.5 trillion over 10 years to the $20 trillion national debt.
Fitch Ratings said on Monday that the House bill could add to the fiscal strain in some states and local jurisdictions by limiting their tax-raising flexibility.
Republican leaders are pushing for the House to vote on a revised tax bill before the U.S. Thanksgiving holiday on Nov. 23. They have said a draft Senate bill could be ready at the end of this week.
The Republican tax plan was devised without Democratic input. The last major tax restructuring, Republican former President Ronald Reagan's 1986 overhaul, received significant input and support from Democrats. (Reporting by Amanda Becker; Additional reporting by Makini Brice and Ginger Gibson; Writing by Paul Simao; Editing by Andrea Ricci and Mary Milliken)