By Marcy Gordon and Andrew Taylor
WASHINGTON (AP) — House Republicans on Thursday unveiled a tax cut plan that would slash the corporate rate and lower the personal taxes of most Americans but also limit a cherished deduction for homeowners, as President Donald Trump and the GOP seek to deliver on the first tax revamp in three decades.
The proposal would add $1.5 trillion to the nation’s debt over the next decade as Republicans largely abandoned fiscal discipline in a plan that could secure a legislative achievement for Trump and score a political win ahead of next year’s midterm elections.
Trump promised in a statement that his 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.”
Middle-income families would pay less, thanks to doubling of the standard deduction and an increase in the child tax credit. Wealthy Americans, like Trump, would benefit from the repeal of the alternative minimum tax and phase-out of the estate tax. Republicans calculate that a family of four with a median $60,000 income would receive a tax cut of almost $1,200.
However, many two-income, upper middle class families would pay more after being bumped into a higher tax bracket and losing a valuable deduction on state income taxes.
“Today is the day. We are introducing legislation that will cut your taxes & make the entire system more simple. This will be a game-changer,” Speaker Paul Ryan, R-Wis., said on Twitter.
The proposal would leave intact the existing rules on 401(k) retirement accounts and the ability of Americans to contribute up to $18,000 into the accounts tax-deferred. But the plan would limit the widely used deduction for mortgage interest for new home loans of $500,000 or less, a sharp reduction from the current $1 million cap.
The plan also would limit the deductibility of local property taxes to $10,000 and eliminate the deduction for state income taxes, which has generated significant opposition from Republicans in high-tax states such as New York and New Jersey.
The tax-writing Ways and Means Committee will work on finalizing the proposal next week, and the GOP’s ambitious timetable to get a bill to Trump by Christmas faces numerous roadblocks. The proposal caused anxiety for some House Republicans and drew criticism from a few in the Senate, which is intent on writing its own bill.
Rep. Dan Donovan, R-N.Y., said he still had concerns about the state and local tax deduction, and planned to meet with leadership.
“We’re going to look at all of this to see how it all plays out,” he told reporters as he emerged from a GOP meeting.
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 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.
Republicans and Trump argue that sharply cutting tax rates for businesses would improve U.S. economic competitiveness.
Democrats have repeatedly complained the plan was too favorable to business and the wealthy, and contradicted Trump’s rhetoric of bringing tax relief and economic benefit to the stressed middle class.
“What we are seeing today is a plan that exacerbates the unfairness and inequality in our tax code,” said top Senate Democrat Chuck Schumer of New York. “To pay for all the tax giveaways in their bill, the Republicans are likely to make it worse for the middle class — not help them but hurt them.”