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Republicans to unveil broad tax cuts, put off tough decisions

President Trump speaks at a campaign rally in Huntsville, Ala. (Brynn Anderson/AP)

President Trump and top Republicans will promise a package of far-reaching tax cuts for companies and individuals, people briefed on the planning said, but the GOP leaders will stop short of labeling many of the tax breaks they hope to strip away, putting off controversial decisions that threaten to sink the party’s tax effort.

Republicans’ “unified” framework, which they will release and promote Wednesday during speeches and meetings, aims to cut taxes by more than $5 trillion over 10 years and recoup more than half of that lost revenue by eliminating numerous tax breaks.

By refusing to specify on Wednesday which tax breaks could be jettisoned, GOP leaders make a calculated effort to try to postpone any backlash while they try to build a coalition, said the people, who spoke on the condition of anonymity because they were not authorized to discuss the internal negotiations.

But they plan to lean heavily into promising Americans that the tax changes will lead to a wave of economic growth that will spur new jobs and better wages if the tax blueprint is passed into law.

Half of Americans think President Trump’s tax plan will favor the wealthy

Trump told a group of Democrats and Republicans on Tuesday the tax framework could lead the economy to grow more than 6 percent a year, more than double what even his advisers had hoped for, and a view that many economists believe is preposterous.

The intensified push comes as Republicans renew their tax cut effort with a sense of political desperation, furious that repeated attempts to repeal the Affordable Care Act have collapsed in the Senate.

But the fresh wounds from the latest failed Senate health care effort appear to have unified — at least for now — Republicans around a joint effort to cut taxes. And after more than eight months of negotiating, the White House and GOP leaders have agreed on several targets to advance this week.

“We’ll be releasing a very comprehensive report,” President Trump said. “And it will be a very, very powerful document.”

The White House and Republican leaders will propose slashing the corporate tax rate from 35 percent to 20 percent and call for lowering the rate many high-income businesses pay through the individual income tax code to 25 percent.

Some tax breaks are for the rich. Others for the poor. Which are for you?

The plan is expected to include other incentives meant to spur companies to invest and spend money immediately, though Congress will have flexibility in how it designs these changes.

In addition, they will call for lowering the top tax bracket for individuals and families from the current 39.6 percent to 35 percent, but they will also ask lawmakers to consider imposing a new, higher rate to ensure that the wealthy don't end up receiving a disproportionate tax cut compared to the middle class and low-income families. This could include charging them a higher tax rate, but, as with many other areas, no final decisions have been made.

There are currently seven individual income tax brackets, and the GOP plan would collapse those into three tax brackets; one at 12 percent of income, one at 25 percent of income, and one at 35 percent of income. The GOP framework will not specify which income level triggers specific tax rates, leaving those decisions to be made later by lawmakers.

These proposals will be targets, not set-in-stone demands. Lawmakers are expected to debate and negotiate changes, leaving the figures open to multiple changes.

They will also propose nearly doubling the standard deduction, which allows people to lower their taxable income without specifying things like charitable contributions or the interest paid on their mortgages.

They will propose expanding the child-tax credit, by increasing the income level at which this benefit phases out for workers. They will also call for eliminating provisions of the tax code that push married couples into higher tax brackets based on their combined income, a dynamic often referred to as a “marriage penalty.”

The GOP plan will additionally call for eliminating the estate tax, which wealthy families must pay to transfer assets after someone dies.

All of these things would help people lower their taxes, an attractive offer to many Americans looking to boost their disposable income.

But the GOP plan will largely stop short of wading into the hardest part of the tax code, which is eliminating tax breaks that businesses and families use to lower their taxes. They want Congress to debate those changes and make them later in the process. Only a few will be named in the document on Wednesday.

Tax proposals from past White House teams, led by both Republicans and Democrats, have included hundreds of pages of details and line-items, specifying which precise tax breaks should be eliminated and how much it would cost to add a new benefit.

The Trump administration decided to approach the tax changes much differently, worried that lawmakers would balk if they felt the White House cut a secret tax deal behind closed doors. But deferring many of the toughest decisions to lawmakers, the White House gives more Republicans an opportunity to have a say in what the changes look like. It also opens the process up to prolonged bickering and foot-dragging, which has sidelined previous tax efforts for decades.

The primary tax break that the White House and Republican leaders aim to target is a provision that allows families and businesses to take a federal deduction for state or local taxes they pay. Eliminating this provision would have an outsized impact on states with relatively high tax rates — such as New York, California, Illinois, and New Jersey — and it could, according to some estimates, raise $1.5 trillion in taxes over 10 years.

Lawmakers from those states are expected to fight vigorously to block the change, but the White House has so far refused to budge.

The White House wants to push all of the tax cuts through Congress by the end of the year, hoping it will lead to a jolt of economic growth, new hiring and better wages. Democrats have warned, though, that the outlines of the GOP tax plan so far would disproportionately help the wealthy, and many have said they will try to block tax cuts that add to the deficit or benefit the top 1 percent of households.

Trump met with a number of Republicans and Democrats on the House Ways and Means Committee Tuesday, which is the panel in charge of writing tax legislation.

Several Democrats who attended the White House meeting said Trump repeatedly insisted that his plan would not help the richest Americans. At one point, they said, he pointed to his top economic advisers — Treasury Secretary Steven Mnuchin and National Economic Council chairman Gary Cohn, both former Wall Street bankers — as examples of the types of people who wouldn’t benefit under the Republican plan.

But the Democrats said Trump confirmed plans to scale back or eliminate the estate tax, which is paid only by high earners, and would not commit that the plan would be “distributionally neutral” — that is, whether its effects would fall evenly along the income scale.

To blunt this criticism from Democrats, Republicans are looking at ways to prevent the wealthy from drastically cutting their taxes through the plan, though they haven’t sorted out how this would work.

“It will be interesting to see what the final product is, because again they’re big on generalities: ‘This is going to be great,”’ said Rep. Linda T. Sánchez (D-Calif.), who attended the meeting. “Very short on specifics. We want to see the distributional table because we want to see who really benefits most.”

Trump also said corporations would pay a low 10 percent rate on profits returned to the United States from abroad, according to multiple Democrats, and declined to detail how the costs of the plan would be offset to avoid ballooning the federal deficit.

“He said, ‘growth,’ ” Sanchez said. “And he said he thinks we could get to 6 percent growth. And most economists say we can’t guarantee 3 percent growth.”

The meeting was a rare gesture of bipartisanship in a process that has been exclusively driven by Republican leaders and priorities thus far. But those inside the room remained skeptical that the meeting was anything but a gesture toward Democrats even as Trump enthused about potential Democratic buy in for the tax bill.

“He kept going on and on about how this was a bipartisan process,” Sanchez said. “We’ve largely been excluded. … That was the first time Democrats even got invited to the table. So I don’t know if his people are telling him, ‘Oh, we’ve been working with the Democrats, and this is the bipartisan product.’ It almost seemed like he believed that.”

Trump has repeatedly tried to pitch the tax changes as a way to benefit the middle class, trying to tap into public sentiment that the tax system disproportionately helps upper-income families.

More than 7 in 10 adults say the nation’s tax system already tends to favor the wealthy more than the middle class, with a 55 percent majority who feel this “strongly,” according to a Washington Post-ABC News poll released Tuesday.

Of those polled, 51 percent said they expect Trump’s tax plan will disproportionately benefit wealthy Americans.