GOP Tax Cut: Winners And Losers

WASHINGTON, DC — House Republicans briefed lawmakers Thursday on their plan to overhaul the tax code, the first rewrite of tax laws in a generation, and cut taxes by $1.51 trillion. The plan, to be formally rolled out later, preserves pre-tax contributions of up to $18,000 to 401(k) retirement plans, a key savings vehicle for many middle-income Americans, and also reduces the number of tax brackets, slashes corporate tax rates and sharply reduces a cherished deduction for mortgage interest.

A summary of the plan released Thursday follows months of internal debate, delays and conflict. It is far from a final product, and lobbyists are already lining up in opposition to some of the key provisions, including limits on the amount of mortgage interest homeowners can deduct and a sharp reduction in the corporate tax rate some conservatives argue could mean more overseas outsourcing of American jobs.

Tax cuts are a key priority for Republicans, who see passage as critical to protect the GOP caucus in the 2018 midterm elections. President Trump has set an ambitious timeline to pass the overhaul in the House by Thanksgiving and the Senate by Christmas, but some of the provisions in the plan are sure to draw fierce lobbying efforts. Republicans largely abandoned fiscal discipline to deliver the plan, which adds $1.5 trillion to the nation's debt over the next decade.

Trump was so enthusiastic about the tax plan that in a meeting with House Republican leaders that he planted a kiss a postcard-sized papers some taxpayers will use to file their taxes — a symbol of the simplification of the tax code.

An early analysis of the details released so far suggests it may not help the middle class as much as Republicans had promised. As currently written, the plan eliminates several deductions many Americans have claimed to chip away at their tax bill. The primary beneficiaries of the plan appear to be the wealthy, even though they would lose some of the same benefits, and major corporations.

"With the details they've presented to us so far, it looks like the tax cut benefits the wealthy and major corporations," Martin Sullivan, chief economist at Tax Analysts and a former staff economist at the Treasury Department, told The Associated Press. "In fact, if you have a large family, given the facts that we have now, that you would pay more in taxes."

The Washington-based Committee for a Responsible Federal Budget said its analysis showed that businesses and corporations — not individuals — would receive about $1 trillion of the $1.5 trillion in cuts over the next decade. In contrast, individuals would see only about $300 billion in tax cuts. And a phase-out and eventual elimination of the estate tax would mean a $172 billion break for people who inherit multimillion-dollar estates.

The tax plan is also drawing lines between abortion foes and pro-choice groups. The tax writers included a provision that "unborn children at any stage of development" in the womb can be designated as beneficiaries in 529 college savings accounts, recognizing the first time unborn children in the tax law. The Planned Parenthood Action Fund says inscribing the definition of "unborn children" into law is aimed at supporting opponents' efforts to restrict abortion.

Watch: House Republicans Reveal The Much Awaited Tax Plan

The plan cuts the top corporate tax rate to 20 percent from 35 percent, a key sticking point for Trump, whose top economist, Kevin Hassett, has said would increase the size of the U.S. economy by $700 billion to $1.2 trillion over a decade, while also increasing average household income to surge by $4,000 annually within a decade. Democrats have claimed the forecast is overly rosy and that cutting corporate tax rates benefits the rich and won't help average Americans.

And the conservative group Americans for Prosperity and Freedom Partners said Thursday the cut could give corporations license to move jobs overseas.

“We strongly oppose adding a new tax that would raise prices on everyday goods while disproportionally hurting the poor and middle class,” AFP President Tim Phillips told Politico. “In addition, any such tax would be an alarming departure from the vision outlined by the Trump Administration and the Big Six in the unified framework.”

Another flash point as the plan moves to the Ways and Means Committee next week could be limits on the deduction for mortgage interest for newly purchased homes at up to $500,000, a sharp reduction from the current $1 million cap. The National Association of Realtors is lobbing against that provision, warning in ads that could mean a tax increase for middle-class homeowners.

“Eliminating or nullifying the tax incentives for homeownership puts home values and middle-class homeowners at risk, and from a cursory examination this legislation appears to do just that,” William E. Brown, president of the National Association of Realtors, told The New York Times. “We will have additional details upon a more thorough reading of the bill.”

Jerry Howard, chief executive of the National Association of Homebuilders, told The Times the provision could create a recession in the housing market, and picks "rich Americans and corporations over small businesses and the middle class."

“It puts such severe limitations on home buyers ability to use the mortgage interest deduction that home values will fall,” he said. “If a home seller takes a loss, that’s money they were counting on for retirement.”

The plan also limits the deductibility of local property taxes to $10,000 while eliminating the deduction for state income taxes, which generated significant opposition from Republicans in high-tax states such as New York and New Jersey.

Also seen as a benefit to the wealthy is a provision that would immediately double exemption for inheritance taxes and repeal the tax after six years.

The Clinton-era 39.6 percent income tax rate for the wealthiest Americans was retained, but a minimum level of income to qualify for the bracket increases to $1 million for couples or families from the current $470,000, which would reduce tax revenue. The brackets announced Thursday:

• 12 percent: Individuals earning up to $45,000 and married couples earning up to $90,000 would file in this bracket.
• 25 percent: Individuals earning up to $200,000 and married couples earning up to $260,000 would fall in this bracket.
• 35 percent: Individuals earning up to $500,000 and married couples earning up to $1 million would fall in this bracket.
• A fourth bracket is yet to be determined.

Among the details released Thursday:

• The plan increases the child tax credit from $1,o00 to $1,600, but repeals the $4,050 per child exemption. It also adds a $300 credit for parent and non-child dependents.
• The number of tax brackets would be reduced from seven to three or four with rates of 12 percent, 25 percent, 35 percent and a category that is yet to be determined. Most people would be able to file their taxes on a postcard-sized form under the simplified tax system outlined in the plan, Republicans said.
• The standard deduction used by most average Americans would nearly double — $12,000 for individuals and $24,000 for families.
• Deductions for medical expenses are eliminated in the plan, which Republicans said would be offset by an overall lowering of tax rates.

In a statement, Trump said:

"I applaud the House Ways and Means Committee for introducing the Tax Cuts and Jobs Act, which is another important step toward providing massive tax relief for the American people. My tax reform priorities have been the same since day one: bringing tax cuts for hardworking, middle-income Americans; eliminating unfair loopholes and deductions; and slashing business taxes so employers can create jobs, raise wages, and dominate their competition around the world. The policies of my Administration have already helped to drive the stock market to all-time highs and the unemployment rate to a 16-year low. Economic confidence is skyrocketing and our GDP grew 3 percent yet again this quarter.

"We are just getting started, and there is much work left to do. The special interests will distort the facts, the lobbyists will try to save their special deals, and some in the media will unfairly report on our efforts. But my Administration will work tirelessly to make good on our promise to the working people who built our Nation and deliver historic tax cuts and reforms — the rocket fuel our economy needs to soar higher than ever before."

See Also: Here Are Deductions Cut In GOP Tax Plan

The Associated Press contributed to this report.

Photo: President Donald Trump kisses a printed example of what a new tax form may look like during a meeting on tax policy with Republican lawmakers in the Cabinet Room of the White House, Thursday, Nov. 2, 2017, in Washington, as House Speaker Paul Ryan of Wis., and chairman of the House Ways and Means Committee Rep. Kevin Brady, R-Texas, watch. (AP Photo/Evan Vucci)