By MARCY GORDON, Associated Press
WASHINGTON (AP) — Promoted as needed relief for the middle class, the Senate Republican tax overhaul actually would increase taxes for some 13.8 million moderate-income American households, a bipartisan analysis showed Monday.
The assessment by Congress’ nonpartisan Joint Committee on Taxation emerged as the Senate’s tax-writing committee was set to begin wading through the measure Monday afternoon, working toward the first major revamp of the tax system in some 30 years.
Barging into the carefully calibrated work that House and Senate Republicans have done, President Donald Trump called for a steeper tax cut for wealthy Americans and pressed GOP leaders to add a contentious health care change to the already complex mix.
Trump’s latest tweet injected a dose of uncertainty into the process as the Republicans try to deliver on his top legislative priority. He commended GOP leaders for getting the tax legislation closer to passage in recent weeks and then said, “Cut top rate to 35% w/all of the rest going to middle income cuts?”
That puts him at odds with the House legislation that leaves the top rate at 39.6 percent and the Senate bill as written, with the top rate at 38.5 percent.
Trump also said, “Now how about ending the unfair & highly unpopular individual mandate in (Obama)care and reducing taxes even further?”
Overall, the legislation would deeply cut corporate taxes, double the standard deduction used by most Americans, and limit or repeal completely the federal deduction for state and local property, income and sales taxes. It carries high political stakes for Trump and Republican leaders in Congress, who view passage of tax cuts as critical to the GOP preserving its majorities at the polls next year.
With few votes to spare, Republicans leaders hope to finalize a tax overhaul by Christmas and send the legislation to Trump for his signature. House leaders have compromised with some rank-and-file Republicans in hopes of passing their version of the bill this week.
Trump and the Republicans have promoted the legislation as a boon to the middle class, bringing tax relief to people with moderate incomes and boosting the economy to create new jobs.
Yet the congressional analysis found that the Senate measure would actually increase taxes in 2019 for 13.8 million households earning less than $200,000 a year. That group, about 10 percent of all taxpayers, would face tax increases of $100 to $500 in 2019. There also would be increases greater than $500 for a number of taxpayers, especially those with incomes between $75,000 and $200,000. By 2025, 21.4 million households would have steeper tax bills.
The analysts previously found a similar magnitude of tax increases under the House bill.
A group of more than 400 millionaires and billionaires, including prominent figures such as Ben and Jerry’s founders Ben Cohen and Jerry Greenfield, designer Eileen Fisher and financier George Soros, asked Congress to reject the GOP tax plan and not give cuts to the super-wealthy like themselves.
“We urge you to oppose any legislation that further exacerbates inequality,” they said in a letter made public Monday.
Neither bill includes a repeal of the so-called individual mandate of Barack Obama’s Affordable Care Act, the requirement that Americans get health insurance or face a penalty. Several top Republicans have warned that including the provision would draw opposition and make passage tougher.
Underscoring the difficulty, House Ways and Means Chairman Rep. Kevin Brady said Sunday he was certain that chamber won’t go along with the Senate’s proposal to eliminate the deduction for property taxes, setting up a major flashpoint.
Among the biggest differences in the two bills that have emerged: the House bill allows homeowners to deduct up to $10,000 in property taxes while the Senate proposal unveiled by GOP leaders last week eliminates the entire deduction. Both versions would eliminate deductions for state and local income taxes and sales taxes.
A key feature of both versions is a cut in the corporate tax rate from 35 percent to 20 percent — but the Senate bill delays the reduction for one year.
Senate Majority Leader Mitch McConnell, R-Ky., asked whether the Senate’s proposed repeal of the property tax deduction could bring higher taxes for some middle-class Americans, acknowledged there would be some taxpayers who end up with higher tax bills.
“Any way you cut it, there is a possibility that some taxpayers would get a higher rate,” McConnell told reporter at a forum in Louisville, Kentucky, with local business owners and employees. “You can’t craft any tax bill that guarantees that every single taxpayer in America gets a tax break. What I’m telling you is the overall majority of taxpayers in every bracket would get relief.”
The deduction is especially important to residents in states with high property values or tax rates, such as New Jersey, Illinois, California and New York. Brady said he had worked with lawmakers in those states to ensure the House bill “delivers this relief” and that he was committed to ensuring it stays in the final package.
Democrats are solidly opposed to the GOP revamp, so the Republicans must find agreement among themselves to have any hope of passage.
Senate Minority Leader Chuck Schumer, D-N.Y., called Trump’s latest urging an “awful idea (that) would take a plan that’s already heavily tilted towards the wealthy and make it even worse.”
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Associated Press writer Bruce Schreiner in Louisville contributed to this report.
