Washington • House and Senate Republican leaders have reached an agreement in principle that would lower the corporate tax rate to 21 percent beginning in 2018, several people briefed on the plan said, a central component of the $1.5 trillion tax plan they hope to vote into law by next week.
The agreement would also lower the top tax rate for families and individuals from 39.6 percent to at least 37 percent, a change that would deliver a major tax cut for upper-income households.
“We are so close right now,” President Donald Trump said at the White House. “So close.”
Many of the tax cuts would go into effect in January, and Trump said Americans would start seeing an impact on their paychecks by February.
GOP leaders did not reveal all of the elements of their agreement, which would amount to a sweeping rewrite of the tax code. They were working to reconcile differences between tax bills that passed the House and Senate in recent weeks. Most of the changes added to the bill in recent weeks would expand tax benefits for companies and the wealthy.
Overall, the tax rewrite would impact virtually every American household and business because of how the plan lowers tax rates while putting new curbs on tax deductions that have been in place for decades.
The agreement still must be approved by House and Senate lawmakers next week, but congressional leaders believe they have the votes to pass it into law. The deal was described by people who spoke on the condition of anonymity as they were not authorized to discuss the private talks.
It would amount to the biggest legislative achievement of Trump’s presidency so far, though Republicans have had a hard time selling the plan to the public and many believe it primarily benefits corporations and the wealthy.
Democrats mounted a last-ditch effort to pressure Republicans to delay votes on the bill, saying the election of Doug Jones to a Senate seat in Alabama on Tuesday night should require a pause. Republicans rebuffed these attempts, triggering fury from liberals.
“This is the ultimate betrayal of the middle class,” Sen. Ron Wyden, D-Ore., said.
Negotiators have spent almost two weeks trying to reconcile differences between separate tax bills passed by the House and Senate.
Wealthy Americans, many of whom were GOP donors, demanded the lower individual tax rate, something House Republicans pushed into the final package with the 37 percent rate.
House Republicans from districts in high-tax states, including California, New York and New Jersey, had demanded changes that would allow Americans to deduct more state and local taxes. This demand was also met, with negotiators allowing Americans to deduct up to $10,000 in property and income taxes.
But the centerpiece of the bill is the major reduction in the corporate tax rate. The House bill would have lowered the corporate tax rate from 35 percent to 20 percent in 2018. The Senate bill would have lowered the corporate rate to 20 percent starting in 2019. Negotiators decided to move the rate to 21 percent to offset some of the cost of having the lower rate kick in immediately.
They also decided to move the top tax rate for individuals and families to 37 percent, a bigger rate cut for top earners than was proposed by either the House or Senate bill. The House bill had set the highest rate at 39.6 percent, while the Senate bill had sought a 38.5 percent rate.
Republicans heard complaints from a number of wealthy Republicans in New York and California who argued they could see their taxes go up if the top rate wasn’t lowered, and Trump said last week the GOP might accommodate some of these concerns.
The mortgage-interest deduction would be changed to limit the benefit to interest paid on $750,000 in home loans, down from the $1 million limit currently in place.
A number of the last-minute changes would make the tax package larger, adding more to the debt. Because of budget rules, the tax cuts cannot add more than $1.5 trillion to the debt over 10 years, and it could not be learned what steps negotiators took.
The tax plan would also undermine a part of the Affordable Care Act that requires almost all Americans to have some form of health insurance or face a financial penalty. The repeal was part of the Senate bill but not included in the version that passed the House.
And the agreement would allow sole proprietors, partners and others who run businesses through the individual income tax code to deduct 20 percent of their income before paying taxes.
Republicans have said their tax overhaul is necessary to make U.S. companies more competitive globally, spur economic growth and increase wages.
“America is comng back bigger and better and stronger than ever before,” Trump said.
Democrats have countered the changes primarily benefit the wealthy and global companies, and they have complained that the changes would add to the debt.
“In reality, the middle class will get stuck with the bill for this debt, either through a future deficit tax, or through cuts to programs they depend on, such as Medicare,” said Rep. Sander Levin, D-Mich.
Even before Wednesday’s changes, multiple analyses have said the biggest benefits for the tax changes would fall to corporations and the wealthy. The benefits for the middle class would be more uneven. Several analyses have found that most Americans would see their taxes fall, at least in the short term, but millions would see an increase because they would loser certain deductions.
But Republicans have tried to stress that an expansion of the child tax credit, lower rates, and the exemption of more income from taxation would help middle class families, especially in the next few years.
The House easily passed its version of the tax bill, but Republicans faced more difficulty in the Senate, where the measure only passed 51 to 49.
Republicans control 52 of the 100 seats in the Senate and need 50 votes to pass their plan, as Vice President Mike Pence could break a tie if necessary. The party can only afford to lose one more GOP vote if they hope to pass the agreement, as Sen. Bob Corker, R-Tenn., already opposes the measure.
Sen. Susan Collins, R-Maine, has expressed concern about lowering the top tax rate, and Sen. Marco Rubio, R-Fla., has complained that Republicans did not do more to further expand the Child Tax Credit. But neither has said whether they would oppose the bill.
The agreement came less than 24 hours after Republicans were rocked by the results of a special Senate election in Alabama, where GOP candidate Roy Moore was defeated by Democrat Jones. Jones is not expected to take office until late December or early January, giving Republicans time to pass their tax plan into law.
The package is expected to add at least $1 trillion to the debt over 10 years. Republicans and White House officials have said it would lead to so much economic growth that it would wipe out any impact on the debt, though they haven’t offered any economic models to back up this assertion.
The changes could have an immediate impact on businesses and households next year because of the lower tax rates, but they will also lead to an immediate scramble as Americans adjust to the new regime.
Republicans plan to release the full details of their tax plan by Friday, and then hold a vote in the Senate as soon as Monday.The final negotiations played out as much of the tax debate has proceeded so far, with details closely held and little public debate in Congress.
Democrats demanded details of the deal that had been reached, protesting angrily when Ways and Means Committee Chairman Kevin Brady, R-Texas, declined to offer any.
“This is indeed a mockery,” Levin said.
But Republicans said they planned to forge ahead and pass the bill through Congress before Christmas.
Rep. Don Young, R-Alaska, said he was confident in the GOP legislation, but that “if we’re wrong, Democrats ought to be happier than the devil,” he said. “You oughta be real happy, you can say look at what the Republicans did, look what they did, they hurt you, they hurt your economy.”
