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 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 rewrite of the tax code that would affect nearly every American household and business, lowering rates while putting new limits on deductions that have been in place for decades.
The deal, which was described by people who spoke on the condition of anonymity, as they were not authorized to discuss the private talks, is the product of a multiweek effort to reconcile differences between tax bills that passed the House and Senate in recent weeks.
If approved, the tax overhaul would amount to the biggest change to the tax code in three decades, as well as the biggest legislative achievement of Trump’s presidency so far.
The plan has been controversial since its inception. Republicans have billed their plan as a tax cut for the middle class, saying an expansion of the Child Tax Credit, lower rates, and the exemption of more income from taxation would help such households, especially in the next few years.
But multiple independent analyses suggest its benefits skew toward corporations and the wealthy — a perception polls suggest the public broadly shares — and Democrats have accused the GOP of showering the wealthy with benefits that the middle class should reap.
“This is the ultimate betrayal of the middle class,” Sen. Ron Wyden (D-Ore.) said at the lone public meeting held by the GOP lawmakers tasked with reconciling the House and Senate bills.
Democrats mounted a last-ditch effort to pressure the GOP to delay votes on the bill, arguing they should wait for Democrat Doug Jones — who defeated Republican candidate Roy Moore on Tuesday in an Alabama special election for a U.S. Senate seat — to join the chamber.
But Republicans rebuffed those attempts and are hoping to pass a final bill early next week. Both chambers would need to vote again to approve the final compromise bill, but Republican leaders believe they have the votes to pass it into law.
The House easily passed its version of the tax bill, but Republicans faced more difficulty in the Senate, where the measure 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 Pence could break a tie if necessary. The party can only afford to lose one more GOP vote if it hopes to pass the agreement, as Sen. Bob Corker (R-Tenn.) already opposes the measure.
It was unclear if all the Republicans who voted for the Senate bill were on board with the compromise arrangement. 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.
Negotiators have spent almost two weeks trying to reconcile differences between separate tax bills passed by the House and Senate, while outside groups pressed for last-minute changes.
Wealthy Americans, some of whom were GOP donors, demanded the lower individual tax rate, and Trump said last week the GOP might accommodate some of these concerns.
In the deal, the GOP has 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.
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.
And Republicans wrestled with proposals to tweak the centerpiece of their bill: 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.
The deal also includes a provision from the Senate plan that would undermine a part of the Affordable Care Act requiring almost all Americans to have some form of health insurance or face a financial penalty. The provision, which was not included in the House bill, is projected to reduce government spending on health-care subsidies but leave millions more without insurance in a decade and lead to a broad increase in insurance premiums.Republicans plan to release the full details of their tax plan by Friday, 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.
Many other tax provisions would be affected. 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 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.
Democrats demanded details of the deal that had been reached, protesting angrily when Ways and Means Committee Chairman Kevin Brady (R-Tex.) declined to offer any.
"This is indeed a mockery," Rep. Sander M. Levin (D-Mich.) said.
But Republicans said they planned to forge ahead and pass the bill through Congress before Christmas.
At the meeting of lawmakers, 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. 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.' "