….target 21% corporate tax, down from 35%
Congressional Republicans reached a deal on final tax legislation yesterday, clearing the way for final votes next week on a package that would slash the U.S. corporate tax rate to 21 percent and cut taxes for wealthy Americans.
Under an agreement, between the House of Representatives and the Senate, the corporate tax would be 1 percentage point higher than the 20 percent rate earlier proposed, but still far below the current headline rate of 35 percent, a deep tax reduction that corporations have sought for years.
Reuters reports that as they finalized the biggest tax overhaul in 30 years, Republicans wavered for weeks on whether to slash the top income tax rate for the wealthy. In the end, they agreed to cut it to 37 percent from the current 39.6 percent.
That was despite criticism from Democrats that the Republican plan tilts toward the rich and corporations, offering little to the middle class.
Senate Finance Committee Chairman, Orrin Hatch, told journalists that he thought the Party “got a pretty good deal,”
It is expected that the emerging agreement would repeal the corporate alternative minimum tax, set up to ensure profitable companies pay some federal tax, and expand a proposed $10,000 cap for state and local property tax deductions to include income tax, lawmakers and sources familiar with the negotiations said.
Similarly, the tax reform proposals are expected to limit the popular mortgage interest deduction to home loans of no more than $750,000 and provide the owners of pass-through businesses, such as sole proprietorships and partnerships, with a 20 percent business income deduction.
Another potential impact of the deal is that it “would gut part of the Obamacare health law by repealing a federal fine on individuals who fail to obtain health insurance, while authorizing oil drilling in Alaska’s Arctic National Wildlife Refuge. Both add-on measures were part of nailing down sufficient votes for passage.”
According to the news report, Republican Senator Ron Johnson was quoted as saying that moving the corporate tax target rate to 21 percent from 20 percent gave tax writers enough revenue to make the tax cuts immediate,
News of the deal began circulating just before a formal House-Senate conference committee began debating it in public, leading Democrats to decry the gathering as a sham. Analysts foresee that a final bill could be formally unveiled tomorrow, with decisive votes expected next week in both chambers.
Reuters reports further that despite expressions of confidence about passage from party leaders, the path to a final vote in the Senate could still be perilous. Republicans, who hold a 52-48 majority in the 100-seat Senate, can lose no more than two votes on the tax bill.
In a White House speech, President Trump said the Internal Revenue Service had advised that if he signs the bill into law before Christmas, the tax cuts would take effect in February.
The IRS had no immediate comment. But a Trump administration official said the IRS would have to readjust its paycheck tax withholding tables for employers and that new withholding levels would take effect in February.
Under the bill, tax returns being filed next year for 2017 would not be affected, but returns filed in 2019 for 2018 would.
The Joint Committee on Taxation and the Congressional Budget Office, both non-partisan research units of Congress, had forecast that wealthy taxpayers and businesses would gain disproportionately from the debt-financed Republican proposals.
As drafted, the Republican plan was expected to add as much as $1.5 trillion to the $20 trillion national debt in 10 years. With that in view, Republicans have been urgently trying to finalize details of their package without increasing its estimated impact on the federal deficit and the debt.
Commenting on the proposals at a tax event held by Democrats, Moody’s Analytics Chief Economist, Mark Zandi, was quoted as saying that the Republican bill, if enacted, would cause interest rates to rise, meaning the benefits of a lower corporate tax rate would be “completely washed out.”