White House advisers are divided over whether to cut the top individual tax rate, and Republican leaders, aware the plan could be construed as a huge giveaway to the wealthy, are trying to design features to the package that would ensure that the rich don't get too large a share of the plan's tax relief.
Top White House negotiators and key GOP leaders have agreed on those targets, but apparently President Trump has not. On Sunday, as he was about to board Air Force One in New Jersey, Trump told reporters he hoped to see the corporate tax rate lowered to 15 percent, a level that his own negotiators had privately dismissed weeks ago.
“We'll see what happens, but I hope it's going to be 15 percent,” he told reporters. “But it's going to be substantially lower so we bring jobs back to the country.”
The lack of agreement, days before the plan is set to be unveiled more broadly, underscore the difficult Republicans face in uniting behind a tax bill.
GOP leaders, including House Speaker Paul D. Ryan (R-Wis.), have said it is impossible to cut the corporate rate to 15 percent without adding too much money to the federal debt. As it stands, the tax cut is expected to add at least $1 trillion to the debt, and potentially much more.
As part of the package of tax cuts, the White House and GOP leaders are hoping to convince their Republican colleagues to cut the rate paid by thousands of businesses that pay taxes through the individual income tax code from 39.6 percent to 25 percent, said the people, who spoke on the condition of anonymity because they were not authorized to speak about the private discussions.
Some details of the plan were reported Friday night by The Washington Post, and others were first reported by Axios on Saturday.
GOP leaders plan to unveil specifics of their targets with their colleagues on Capitol Hill this week, and the details could change as negotiations go forward.
Republicans plan to push for collapsing the seven income tax rates to three new brackets, with the top bracket being 35 percent. It is unclear what income level they want to qualify for that tax bracket. Trump made additional comments on the tax brackets on the tarmac on Sunday, but it wasn't clear exactly what he was referring to and the White House didn't immediately clarify his intention.
“We're going to bring the individual rate to 10 percent or 12 percent, much lower than it is right now,” he said.
Among details that have become public, the plan's benefits would accrue largely to the wealthy, an awkward position for a president who promised his administration would be an economic boom for working-class and middle-class households.
Even the tax cut Trump is hoping to advance for companies that pay individual taxes would help thousands of upper-income business owners in a way critics have said could be gamed to lower their taxes even more. White House officials have said they would create “guardrails” to prevent against this but they have not explained how.
Many contours of the talks are similar to what Trump proposed in April. The Tax Policy Center, a nonpartisan group that reviews tax proposals, found that about 50 percent of the cuts from that plan would benefit the top 1 percent of U.S. households. The Tax Policy Center found that each one of those households would get an average annual tax cut of $175,000.
External estimates, based on initial reports of the plan and not full details, found that it would cut taxes by $5.5 trillion over 10 years. Some Senate Republicans are trying to tailor the tax cut so that it reduces revenue by only $1.5 trillion over 10 years.
That means the White House and congressional Republicans would have to find $4 trillion in tax breaks to eliminate, something that could prove very difficult if they insist on keeping tax rates low for the wealthy. While rate cuts are broadly popular, many tax breaks are also popular — such as deductions for charitable giving or for interest paid on a home mortgage — or enjoy support from the powerful industries and lobbying groups.
The latest plan in many ways meets the tax rate levels set by House Republicans months ago, although they would have raised an additional $1 trillion by charging higher taxes on certain imports. That import tax proposal proved too controversial and has been scrapped, making it harder for Republicans to craft a tax proposal without adding a large amount to the government’s debt.
The tax cut plan has gained momentum in recent weeks but it will still prove difficult to pass such a giant tax cut into law.
The White House and Republicans have said a giant tax cut will help boost economic growth, make the United States more competitive and raise wages. Republicans in Congress have fought for years to balance the budget over 10 years and eliminate the deficit, but they have pivoted away from that demand during the tax talks because many of them think that tax cuts will deliver a needed jolt to the economy.
Many Democrats, meanwhile, have said the details of Trump's tax plan would skew largely toward benefiting the wealthy and add trillions of dollars to the federal debt, potentially dragging down the economy with giant interest payments that would overshadow any prospects for growth.
Abby Phillip contributed to this report.