REPUBLICANS PUSH FOR TAX CUTS; TOP RATE 35%…. Plan Could Leave High-Wage Earners With Little to Gain
The big change: The GOP leaders and the White House plan to cut the top tax rate for “pass through” businesses from 39.6 percent to 25 percent. (Most businesses in America do not pay the corporate tax. Sole proprietors and other mostly smaller businesses see their profits “passed through” to their owners and taxed at the individual income rate.)
The so-called “Big Six” tax framework — named because it’s been hashed out behind closed doors between six top Republicans and administration officials — will set up a clash with Democrats over the tax breaks that apply to large corporations and upper income Americans.
- Most Democrats have already drawn a red line on tax reform: 45 out of 48 Democratic senators signed a letter saying they wouldn’t support any tax bill that adds to the deficit or offers new tax breaks to the wealthiest Americans.
- But Republicans are desperate for a win and appear on course to fund tax cuts with a blend of deficit spending and the closing of loopholes. They will dare Democrats, especially the 10 senators up for re-election in states Trump won, to vote against tax breaks for their constituents.
What’s next: President Trump is planning to give a speech unveiling the Big Six framework in Indiana on Wednesday, three sources said. The framework is the starting point for the tax reform process. It reflects the shared view of the Big Six, but it will inevitably change substantially as it goes through the normal legislative processes in the House and Senate.
(The “Big Six” are House Speaker Paul Ryan, Senate Majority Leader Mitch McConnell, Treasury secretary Steven Mnuchin, White House economic adviser Gary Cohn, and the chairmen of the two tax-writing committees — Senate Finance Committee chairman Orrin Hatch and House Ways and Means chairman Kevin Brady.)
The details, per three sources with knowledge of the plan:
- Top individual tax rate cut from 39.6 to 35. The current seven income tax brackets collapsed to three, as part of simplification. (Axios hasn’t obtained the other two rates.)
- Axios can confirm that the Big Six agreed to cut the corporate tax rate from 35 percent to 20 percent. That key detail leaked last night to the Washington Post. (Trump has said he wants the corporate rate to be 15 percent.)
- The Big Six framework is also expected to include guardrails to prevent wealthy people from artificially lowering their income taxes by rearranging their affairs to get taxed at the small business rate.
- We can confirm, too, WashPo’s reporting that Republicans plan to double the standard deduction — a boost for the middle class and a key component of simplification.
These Big Six decisions have been held incredibly tightly, but details began leaking out around Capitol Hill on Friday night and the corporate rate was first published by the Washington Post’s Hill team. By Saturday, influential figures on K Street were beginning to learn more details.
Why the GOP’s Tax Plan Could Leave High-Wage Earners With Little to Gain
Republican proposal to create a new special rate for business income potentially puts high-income wage earners at a disadvantage
WASHINGTON—Today, a business owner making $500,000 gets taxed much like a corporate executive with a $500,000 salary. How they make their income doesn’t matter much.
That could change dramatically under Republican plans aimed at driving down tax rates on business income, leaving high-income wage earners with much less to gain from a tax overhaul.
Republicans, eager to drive down business tax rates in a bid to boost economic growth, want roughly similar tax rates for corporations and for so-called pass-through firms that report business income on the individual tax returns of their owners.
For them, lowering the 35% corporate tax rate requires also lowering the 39.6% top rate for pass-through business income, even though creating a new special rate for that business income leaves a potentially large gap with the top rate for high-income wage earners.
The exact contours of the GOP tax agenda aren’t set. Top lawmakers and administration officials say they will release another blueprint in the coming days.
New Version of Graham-Cassidy Health Bill Would Add Sweeteners for Alaska
WASHINGTON — An updated version of the Graham-Cassidy health care bill circulating among lobbyists and on Capitol Hill on Sunday night has changed to provide more benefits to Alaska, a move to appeal to Republican Sen. Lisa Murkowski, who has been highly skeptical of efforts to repeal the Affordable Care Act.
The new version would grandfather Native Alaskans into Medicaid so they wouldn’t lose coverage after the expanded Medicaid program is rolled back in 2020, according to a section-by-section summary of the new legislation obtained by an industry lobbyist (PDF).
The update would also carve out a special provision for states with low population densities so that 5 percent of federal funds would be guaranteed for rural states, including Alaska.
It’s still unclear, however, whether the legislation will be brought to the floor for a vote this week before the deadline of Saturday. Sen. John McCain, R-Ariz., came out in opposition to the bill Friday because of what he complained was a rushed and closed process. Sen. Susan Collins, R-Maine, said Sunday that it would be difficult for her to get to “yes” on the legislation.