Donald Trump has said his administration will give Americans “a tremendous tax cut” for Christmas, even as conflict between Republican legislators threatens the party’s chances of passing any tax measure by the end of the year.
“We are giving them a big, beautiful Christmas present in the form of a tremendous tax cut, which will be the biggest cut in the history of our country,” Mr Trump said. “It will also be tax reform and it’ll create jobs.”
Later, during a meeting with the tax-writing House Ways and Means Committee, Mr Trump stated a perhaps more extreme goal: “I want to have a bill on my desk, Kevin, hopefully by Thanksgiving,” he said, referring to the group’s chair, Republican Kevin Brady.
After some delay, Republicans in the House of Representatives have revealed the most sweeping rewrite of the US tax code in decades that could affect almost every single American household and business.
The Tax Cuts and Jobs Act, estimated to cost $1.51 trillion over 10 years, proposes slashing the corporate tax rate from 35 per cent to 20 per cent and would collapse seven tax brackets into four, with the highest rate remaining at 39.6 per cent and a new bottom rate of 12 per cent.
“With this plan, we are making pro growth reforms, so that yes, America can compete with the rest of the world,” said House Speaker Paul Ryan of Wisconsin.
The wealthiest Americans would benefit from the proposal through the cuts to business taxes and the elimination of the estate tax and the alternative minimum tax.
The alternative minimum tax is designed to prevent tax avoidance. The estate tax, currently 40 per cent, only affects a few thousand uber-wealthy families each year – individual estates larger than $5.49m, and $11m for couples.
The legislation would also cut the popular mortgage interest deduction – used by millions of American homeowners – by about 50 per cent.
Currently, Americans can deduct interest payments made on their first $1m worth of home loans. Under the bill, people with new mortgages would only be able to deduct interest payments made on their first $500,000 worth of home loans. This proposal would particularly affect those living in places where the cost of living is higher, such as San Francisco, Washington, DC and New York.
Despite Mr Trump’s display of optimism that the proposal will make it to his desk soon to be signed into law, disagreements between Republicans over particulars in the bill could derail the legislation before it even gets off the ground.
The text of the bill released on Thursday is far from final, and is expected to ignite a legislative and lobbying battle in Washington.
In the weeks leading up to the unveiling of the proposal on Thursday, party members argued over ways to pay for the tax cuts that will lead to a $1.51 trillion increase in the government’s debt over the next decade.
The bill calls for limiting the state and local tax deduction – a proposal that could help Republicans raise a large amount of money. But it could become a sticking point for lawmakers from high-tax states such as New York and New Jersey, where constituents greatly benefit from the deduction.
Since Republicans are using a legislative process known as reconciliation – meaning they can push a bill through Congress without any support from Democrats – they must keep the cost of the bill to $1.5 trillion over 10 years.
It also means the Senate’s Republican leadership can only afford two defections during a vote on the bill. The Republican party currently holds a narrow 52-seat majority in the 100-member chamber, and Vice President Mike Pence would cast the deciding vote in the event of a tie.
