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Senate, House reach agreement in principle on $1.5T tax bill

President Donald Trump as seen in this July

President Donald Trump as seen in this July 24, 2017 photo. Credit: AP

WASHINGTON — House and Senate Republican leaders on Wednesday reached an agreement in principle on a sweeping overhaul of the U.S. tax code, setting the stage for votes next week on a bill to slash corporate taxes and lower individual rates.

The emerging legislation from that agreement would deeply cut the corporate rate to 21 percent from 35 percent — a rate that would go into effect next year — and would shave the top individual rate to 37 percent from 39.6 percent, a benefit for upper-income filers, reports said.

The bill still delivers a hit to filers in New York and other high-tax states by axing most state and local tax deductions. News reports citing legislative aides said filers would be able to deduct a total of $10,000 for property and income taxes. One report included sales taxes as well.

The bill also includes a cap on the deduction for interest on new mortgage debt at $750,000, down from the current $1 million.

And the bill also would include nontax measures to allow drilling in a section of the Arctic National Wildlife Refuge, a measure that solidified the support of Sen. Lisa Murkowski (R-Alaska), and the effective repeal of the Obamacare mandate to obtain health insurance or pay a tax.

Republican tax writers and leaders have not released the final bill, saying they are still working out details and still need an assessment from the official congressional scorekeepers.

Rep. Kevin Brady (R-Texas), a key tax writer, said the conference committee of Senate and House members tapped to merge their two bills would release the final version Friday. The panel met in a rancorous three-hour public meeting Wednesday.

“We’re very, very close to a historical legislative victory,” President Donald Trump said at a lunch with conference committee members. Later, in a sales pitch for the tax cuts, Trump told Americans that “we need your help to get Congress across that finish line.”

And Trump said the IRS told him that if Congress passes the legislation and he signs it before Christmas, “Americans will see lower taxes and bigger paychecks beginning in February,” as the lower tax rates and doubled standard deduction go into effect.

The measure would give Trump his first major legislative victory in Congress and would fulfill a long-standing goal of House Speaker Paul Ryan (R-Wis.), who sought to rewrite the tax code for the first time in three decades.

Tax writers decided to cut corporate rates to 21 percent, instead of Trump’s repeated insistence on 20 percent, so that the new tax rate could go into effect next year. The Senate version initially delayed the corporate tax cut until 2019.

“If it got down to 21, I would sign,” Trump said about the corporate tax rate.

Republican leaders expressed confidence they had the votes to pass the bill next week, though Sen. Bob Corker (R-Tenn.) told reporters he would vote no because the bill would add $1.5 trillion to the deficit. Sens. Jeff Flake (R-Ariz.) and Susan Collins (R-Maine) had not made up their minds. Republicans can only lose two of their 52 votes and still pass the bill.

Earlier, Senate Minority Leader Chuck Schumer (D-N.Y.) criticized the shift in the top individual rate to 37 percent, charging that it was a way to mollify upper-income filers in New York and other high-tax states hit hard by the loss of state and local tax deductions, known as SALT.

“The idea was that SALT is hurting the middle class. Instead of undoing their repeal of state and local deductibility, they reduce rates further on the rich,” Schumer said.

On the day after Democrat Doug Jones won an upset victory over controversial Republican Roy Moore to fill the junior Senate seat from Alabama, Schumer urged Senate Majority Leader Mitch McConnell (R-Ky.) to put off a vote on the tax bill until Jones is seated.

But Trump said, “I think it’s very important for the country to get a vote next week.”

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