Republicans In Talks To Reduce The Tax Rate For Top Earners To 37 Percent

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President Donald Trump, flanked by Senate Majority Leader Mitch McConnell of Ky., left, and House Speaker Paul Ryan of Wis., speaks during a meeting with House and Senate leadership, Wednesday, March 1, 2017, in the Roosevelt Room of the White House in Washington. (AP Photo/Evan Vucci)
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Congressional Republicans are in advanced talks to lower the top tax rate for individuals from 39.6 percent to 37 percent as they finalize a massive $1.5 trillion tax package, said three people familiar with the negotiations.

The move follows complaints from wealthy taxpayers in New York and elsewhere that their taxes could go up under the legislation because of other changes it makes to the code.

The change, if finalized, would amount to a major tax cut for the wealthiest Americans. And it would be certain to spark a furious response from Democrats who are unanimously opposed to the legislation which they already have been casting as a giveaway to corporations and the rich.

The people insisted on anonymity to discuss private negotiations.

House and Senate negotiators are working to blend legislation passed separately by each chamber, with the aim of voting on a final package next week and sending it to President Trump to sign before Christmas.

Lawmakers are also settling on a corporate rate of 21 percent, higher than the 20 percent corporate rate passed by each chamber, but still a massive decrease from the current 35 percent corporate rate.

And they are moving toward allowing homeowners to deduct interest on mortgages up to $750,000, higher than the $500,000 that the House bill allowed.

GOP aides stressed that no changes would be final until the legislation has formally been filed, which lawmakers are aiming to do on Friday.

A final decision could be made later Tuesday, as House and Senate leaders work to reconcile differences between tax bills that passed each chamber in recent weeks.

Republican Sen. John Thune, R-S.D., the No. 3 Senate Republican, said in an interview that negotiators are reviewing a proposal they received late Monday from House leaders. But he said there is still “swirl” around key details – including the corporate tax rate.

House and Senate leaders have been trading proposals back and forth for days.

There were a number of other decisions that remained in flux.

They were discussing the possibility of allowing the corporate tax cuts to take effect in 2018 instead of the 2019 date set in the Senate bill.

Both bills included as their central feature a massive reduction in the current 35 percent tax rate down to 20 percent. Trump had insisted for weeks that he would not allow anything above a 20 percent rate, but in recent days the White House has showed more flexibility as they tried to help lawmakers get a deal across the finish line.

Thune is among the group of lawmakers working to meld the $1.5 trillion bills passed separately by the House and Senate into a final product. Republicans will then aim to push that capstone bill through both chambers of Congress and onto President Trump’s desk before Christmas.

“We’re narrowing those differences, we’re trying to take things off the table so we can narrow those differences,” Sen. John Cornyn, R-Texas. “But I’m not going to talk to you about those differences until we’ve got a final deal.”

Ever since the deliberations regarding slightly raising the corporate rate became public, conservative groups have been agitating against raising it over 20 percent. So negotiators face significant crosswinds on the issue, illustrating the pressure they are under as they rush to wrap up a final product.

“We are entering another huge week for tax reform,” House Speaker Paul Ryan, R-Wis., said Tuesday. “Tax reform is what people need right now and I am so thrilled that we are so close to the finish line. We are going to keep at it so we can deliver real tax relief before Christmas.”

Earlier, speaking to reporters Monday evening, House Ways and Means Chairman Kevin Brady, R-Texas, said numerous details remained in play. One of those is the estate tax, which the House bill repeals fully while the Senate bill only limits. House conservatives have been pushing to keep full repeal, but Brady indicated openness to the Senate approach.

“In the House we feel very strongly about fully repealing the estate tax,” Brady said. “We’re having those discussions with the Senate that took a different approach. They did double the exemption so that helps a lot of family-owned farms and businesses. So that’ll be part of the final agreement.”

Overall, Brady said, “nothing’s final until everything’s final and tax reform is truly a Rubik’s cube.”

“We continue to stay on schedule for a conference committee report and a vote next week all with the goal of getting this to the president’s desk soon thereafter,” Brady said.

Beyond the estate tax, the House and Senate bills have a number of differences that must be resolved.

For example, the Senate bill retained seven income tax brackets for individuals and families, while the House bill collapsed those brackets down to four.

The House and Senate bills also tax partnerships and sole proprietorships much differently. The House bill would also put new limits on how much mortgage interest a household can deduct from their income, while the Senate bill would not make changes.

And the House bill would eliminate the alternative-minimum tax, while the Senate bill would not.

Congressional leaders have already signaled how they plan to resolve some differences between the two bills. For example, the Senate bill would repeal the individual mandate of the Affordable Care Act, while the House bill would not. But House leaders have suggested they like that change to the health care law and support including it in the final bill.

(c) 2017, The Washington Post · Erica Werner, Damian Paletta

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