House approves Republican budget plan, paving way for sweeping tax overhaul

President Trump's 2018 budget request is hitting the medical and science communities hard. Veuer's Nick Cardona (@nickcardona93) has that story.

(USA TODAY) -- The House voted Thursday to adopt a Senate-passed Republican budget plan, clearing the way for a sweeping overhaul of the tax code for individuals and businesses that could add as much as $1.5 trillion to the national debt.

The budget measure, approved by a narrow margin of 216 to 212, differs sharply from one the House approved Oct. 5. Back then, House Republicans mandated that any tax cuts from lowering tax rates must be offset by closing loopholes or cutting spending.

But after the Senate last week approved a plan that would allow tax changes that add as much as $1.5 trillion to the debt, the House went along, with many members saying they needed to deliver a major legislative "win" going into the 2018 midterm elections.

A key provision of the budget is "reconciliation" language that prevents Democrats in the Senate from using a filibuster against a tax bill, which would require 60 votes to overcome. Instead, Republicans, who hold 52 Senate seats, will need only 50 votes and the support of Vice President Mike Pence to pass the tax bill.


But the tax bill has still not been released, and differences over many details remain, meaning passage of a final bill remains uncertain.

Supporters say they believe tax cuts will spur economic growth that will offset some of the lost revenue from lower rates. But  Sen. Bob Corker, R-Tenn., has said he would not support a plan that significantly increased the debt, and he believes Congress needs to do the hard work of ending deductions and loopholes to pay for lower rates.

Democrats have also used early analyses showing the bulk of the benefits from the tax plan going to those at the top of the income scale to try to turn public opinion against it. Republicans have countered that the final plan would benefit the middle class, though officials have struggled to actually define that term.

A tax framework released in September called for shrinking the number of income tax brackets from seven to three, nearly doubling the standard deduction while eliminating personal exemptions, increasing the child tax credit and ending most itemized deductions, except those for mortgage interest and charitable contributions. The plan would eliminate the estate tax, which is only charged on estates worth more than $5 million, and the Alternative Minimum Tax, which is overwhelmingly paid by the wealthy.

Republicans have rejected rhetoric that characterized the plan as a giveaway to the rich, saying the final details would show how families across the country would benefit.

Corporations would see the top tax rate drop from 35 percent to 20 percent, and "pass-through" businesses, whose owners report their income on personal returns rather than corporate returns, would get a new maximum 25 percent rate.

But major questions remain unanswered, including the income levels that would qualify for the new tax brackets of 12%, 25% and 35%, and exactly what deductions would survive.

Major battles are expected over how to write restrictions that prevent wealthy people from classifying their income as being from their own business, and therefore getting the top rate of 25 percent instead of the 35 percent for individuals.

House Speaker Paul Ryan also said last week the House plan would include a fourth rate that was higher than 35 percent to ensure the wealthiest paid their fair share, though he did not say what that rate would be or what income levels it would affect.

Lawmakers from high-tax states such as New York, New Jersey and California have been battling to preserve the deduction for state and local taxes. But eliminating it, as the September framework envisioned, would provide an estimated $1.3 trillion over 10 years that could offset lowering rates.

Rep. Kevin Brady, chairman of the Ways and Means Committee, said a tax bill and a schedule for considering it would be announced next week. Brady, R-Texas, told reporters on Wednesday he believes a deal could be reached to protect some of the deduction for property taxes, but he did not mention the deduction for state income taxes.

Tax breaks for retirement savings are another wildcard. After published reports said Congress was looking at capping the benefits of putting money into 401k accounts, President Trump said on Twitter that 401ks would not be touched.

But Brady, indicated that was still not settled.

"We think in tax reform we can create incentives for Americans to save more and save sooner," Brady said. "So we are exploring a number of ideas in those areas and we’ve invited those who are really experts in retirement savings to come to the table. They’ve brought us ideas on how best to do that. So we’re having that discussion."

© 2017 USATODAY.COM


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