House Republicans unveil tax plan to benefit corporations and the wealthy

House Republicans put out long-awaited legislation that would slash the corporate tax rate and repeal inheritance taxes of multimillion-dollar estates

Donald Trump’s push for deep tax cuts reached a milestone on Thursday as his fellow Republicans in the House of Representatives unveiled a long-awaited plan which would benefit corporations and the wealthy but is less generous to the middle class.

The legislation would permanently lower the corporate tax rate to 20% from 35% and repeals the inheritance tax on multimillion-dollar estates in what would be the most sweeping change to the United States tax code in three decades.

It also would reduce the number of tax brackets from seven to four and nearly double the standard deduction that most Americans take on their tax returns to $12,000 for individuals and $24,000 for couples.

Although the Republicans had long described their effort as a push for “tax reform”, the bill entitled “the Tax Cuts and Jobs Act” was presented explicitly as a tax cut on Thursday.

The GOP speaker, Paul Ryan, hailed the plan as a “very important and special moment” for the country and claimed that it would reduce taxes for a family of four that makes $59,000 a year by $1,182, while fellow Republicans such as the majority whip, Steve Scalise, boasted that it would allow Americans to fill out their taxes on a postcard.

The White House put out a statement praising the legislation as providing “the rocket fuel our economy needs to soar higher than ever before”. Trump later said the legislation was “a big, beautiful Christmas present in the form of a tremendous tax cut” while speaking to reporters.

The sweeping tax cuts, long a priority of the Trump administration and congressional Republicans, faces major obstacles to passage as Democrats are almost uniformly skeptical of the plan and a number of Republicans have concerns.

Among the biggest red flags within the GOP are a provision to cap the deduction for state and local income taxes, which has faced skepticism from Republicans who represent high-tax states such as New York and New Jersey and the plan’s addition of $1.5tn to the national debt, which may raise the ire of deficit hawks. The bill would eliminate the tax deduction for state taxes and leave only a limited deduction for up to $10,000 in local property taxes.

The legislation is expected to face fierce opposition from realtors and the homebuilding industry as well over a provision to cap the deduction for mortgage interest on newly purchased homes at $500,000.

It also has already sparked opposition from the National Federation for Independent Business, a small business lobby. The group expressed concern that the corporate tax cuts on small businesses that pay taxes on pass-throughs via their owner’s individual tax returns were insufficient.

Democrats vowed to rally opposition to the tax bill using a similar approach to the one used to help stop a Republican healthcare plan, which fell one vote short in the Senate amid widespread resistance among the public.

House Democratic leader Nancy Pelosi panned the tax proposal a “shell game” and a “Ponzi scheme” and said the plan was analogous to a banquet for the wealthiest Americans, who tossed crumbs to middle-class families while they feasted.

According to a summary obtained by news organizations, the long-awaited tax plan would:

• Limit the widely used deduction for mortgage interest for newly purchased homes at up to $500,000, a sharp reduction from the current $1m cap.

• Limit the deductibility of local property taxes to $10,000.

• Eliminate the deduction for state income taxes.

• Nearly double the standard deduction used by most Americans to $12,000 for individuals and $24,000 for families.

• Slash the corporate tax rate from 35% to 20%.

• Repeal the inheritance taxes on multimillion-dollar estates.

• Increase the child tax credit from $1,000 to $1,600, though the $4,050 per child exemption would be repealed.

• Shrink the number of tax brackets from seven to four, with respective tax rates of 12%, 25%, 35% and 39.6%.
  

• Preserve a popular retirement account for middle-class Americans by leaving intact existing rules on 401(k) retirement accounts and the ability of Americans to contribute up to $18,000 into the accounts tax-free.
  

GOP leaders briefed rank-and-file lawmakers on the proposal on Thursday morning ahead of a formal rollout and a show of unity event at the White House with Donald Trump.

A major revamp of the tax code, the first in three decades, is a top legislative and political priority of Republicans.

But curtailing the state and local income tax deduction is sure to face opposition from Republicans in high-tax states.

“I view the elimination of the deduction as a geographic redistribution of wealth, picking winners and losers,” said Representative Lee Zeldin of New York. “I don’t want my home state to be a loser, and that really shouldn’t come as any surprise.” The New York Republican later came out against the bill.

The legislation is a longstanding goal for Capitol Hill Republicans who see a once-in-a-generation opportunity to clean up an inefficient, loophole-cluttered tax code.

The influential conservative representative Mark Meadows dismissed proposed retirement changes as a “non-starter”, adding “that’s what most of middle-income America uses as their nest egg”.

The plan calls for nearly doubling the standard deduction used by most average Americans to $12,000 for individuals and $24,000 for families, and increasing the per-child tax credit. On net, it could mean tax increases for many upper-middle-income families.

Slashing the corporate tax rate from 35% to 20% was a key demand of Trump’s. Repealing the inheritance taxes on multimillion-dollar estates would also represent a big break for the wealthy.

Republicans and Trump argue that sharply cutting tax rates for businesses improves US economic competitiveness, but the possibility of letting the lower corporate rates expire is rankling some longtime advocates who say the uncertainty could limit its boost to the economy.

The ambitious timetable calls for passing the complex measure in the House by Thanksgiving and House Republicans have already announced a markup hearing for the bill on Monday.

“Failure is not an option,” said Representative Chris Collins, a Republican from New York.

Reuters and the Associated Press contributed to this report