GOP Tax Plan Calls For Deep Cuts In Tax Rates
DAVID GREENE, HOST:
Congressional Republicans are out this morning with legislation to enact the most sweeping overhaul of this country's tax system in over 30 years. The GOP says this will spur economic growth by slashing tax rates for most individuals and corporations. The challenge is paying for those cuts so the deficit doesn't blow up. After a long wait, we have details of this bill in our hands this morning. Well, more accurately, it's - the details are in NPR's Scott Horsley hands. And Scott is here. Hey there, Scott.
SCOTT HORSLEY, BYLINE: It's like Christmas morning for tax nerds.
GREENE: It's like Christmas morning for tax nerds. And neither of us are included in that category, right? So what would this bill actually do now that you're - we're actually getting a clearer picture?
HORSLEY: Well, as expected, it would slash the corporate tax rate from 35 to 20 percent and also flatten and reduce individual tax rates. As you say, Republican sponsors of this bill say that would fuel economic growth. It would also, however, drain trillions of dollars from federal coffers. So the big challenge has been, how do you offset some of those losses in revenue? Tax writers have been playing around for - with the math for several weeks now. And that's one of the reasons this rollout, originally scheduled for yesterday, was postponed until today.
GREENE: Yeah. I mean, we've been talking about this for weeks and talking about the Republican Party just philosophically has this tension because they want to cut taxes. They also - there are a lot of deficit hawks who are in that party. Has anything changed? I mean, have they figured out some details and figured out this math problem?
HORSLEY: They're still struggling on the math problem, but there are certainly some new wrinkles in the draft bill that we're seeing this morning. One is they are preserving the existing top tax rate for the wealthiest Americans, although the threshold of income at which that top rate - 39.6 percent - would kick in has been raised. This is partially to raise more revenue for the government. It's also to address concern that the original tax draft was overly skewed to the rich. When the outline first came out, the Tax Policy Center here in Washington, for example, said 80 percent of the savings would go to those at the top 1 percent of the income ladder.
GREENE: And Democrats were hammering the Republicans over that fact.
HORSLEY: Absolutely. So by preserving that top rate for the wealthy, that partially addresses that concern. However, this tax bill would still deliver big savings to the wealthy. Not only would there be lower individual tax rates, but it also eliminates the alternative minimum tax which primarily hits the sort of working wealthy. And it would phase out the estate tax, which hits the very wealthy, over six years.
GREENE: But this is just always hard, isn't it? I mean, this hasn't happened - a tax overhaul - since the 1980s. You say the math problem still isn't figured out. The Republicans are still going to have to work on that. So at once, this is now a bill. It's out there. It'll come out today. What are the big fights ahead?
HORSLEY: Yeah. There are big fights ahead. One is going to be over the mortgage interest deduction. That was initially taken off the table. We were told at the outset that the mortgage interest deduction will be held sacred in this process. But, in fact, the House writers have proposed capping the mortgage interest deduction for future home purchases on homes valued at half a million dollars. That's down from a million dollars today. Now, that's a lot of money, but in high-cost states like California, Washington, New York, New Jersey, that's going to be controversial. And this could invite the wrath of the realtors lobby, which is a powerful lobby here in Washington.
There are other loopholes that are going to be controversial, too. One man's loophole is another's cherished tax deduction. This draft does preserve the tax break for retirement savings, which was an idea that was floated. But it does away with many of the tax breaks for state and local income taxes, a provision that is particularly costly in high-tax states. Again, many of those are Democratic states. But there are a lot of House Republicans who represent those areas, and that's going to be a concern for them.
GREENE: And briefly, Scott, what's the plan in terms of selling this bill?
HORSLEY: Well, we've already seen President Trump doing a road trip to promote this tax proposal. He's off on his way off to Asia, not to promote taxes, but to deal with international politics. But Cabinet members will be staying behind. They'll be going on the road to promote this plan. This is, you know, item number one for the Republicans. They really feel like they need to get this tax bill passed.
GREENE: All right. NPR's Scott Horsley. Scott, thanks.
HORSLEY: Good to be with you, David. Transcript provided by NPR, Copyright NPR.