WASHINGTON — House Republicans on Thursday unveiled a tax cut plan that would slash the corporate rate and lower the personal taxes of most Americans but also limit a cherished deduction for homeowners, as President Donald Trump and the GOP seek to deliver on the first tax revamp in three decades.
The proposal would add $1.5 trillion to the nation's debt over the next decade as Republicans largely abandoned fiscal discipline in a plan that could secure a legislative achievement for Trump and score a political win ahead of next year's midterm elections.
Trump promised in a statement that his administration "will work tirelessly to make good on our promise to the working people who built our nation and deliver historic tax cuts and reforms — the rocket fuel our economy needs to soar higher than ever before."
Middle-income families would pay less, thanks to doubling of the standard deduction and an increase in the child tax credit. Wealthy Americans, like Trump, would benefit from the repeal of the alternative minimum tax and phase-out of the estate tax. Republicans calculate that a family of four with a median $60,000 income would receive a tax cut of almost $1,200.
However, many two-income, upper middle class families would pay more after being bumped into a higher tax bracket and losing a valuable deduction on state income taxes.
"Today is the day. We are introducing legislation that will cut your taxes & make the entire system more simple. This will be a game-changer," Speaker Paul Ryan, R-Wis., said on Twitter.
The proposal would leave intact the existing rules on 401(k) retirement accounts and the ability of Americans to contribute up to $18,000 into the accounts tax-deferred. But the plan would limit the widely used deduction for mortgage interest to new home loans of $500,000 or less, a sharp reduction from the current $1 million cap.
The plan also would limit the deductibility of local property taxes to $10,000 and eliminate the deduction for state income taxes, which has generated significant opposition from Republicans in high-tax states such as New York and New Jersey.
The tax-writing Ways and Means Committee will work on finalizing the proposal next week, and the GOP's ambitious timetable to get a bill to Trump by Christmas faces numerous roadblocks. The proposal caused anxiety for some House Republicans and drew criticism from a few in the Senate, which is intent on writing its own bill.
Rep. Lee Zeldin, R-N.Y., announced his opposition: "We need to fix this."
The plan would shrink the number of tax brackets from seven to three, with respective rates of 12 percent, 25 percent, 35 percent and 39.6 percent. The tax system would be simplified, and most people would be able to file their returns on a postcard-sized form.
The plan would set a 25 percent tax rate starting at $90,000 for married couples, with a 35 percent rate beginning to bite at $260,000 — which means many upper-income families whose top rate now is 33 percent would face higher taxes. Individuals making $500,000 and couples earning $1 million would face the current Clinton-era top rate of 39.6 percent.
The plan would slash the corporate tax rate from 35 percent to 20 percent, a demand by Trump. It also would repeal the inheritance taxes on multimillion-dollar estates, a big break for the wealthy.
"There are a lot of people still in our conference who are anxious to see exactly how this plays out with growth in the economy, what the long term deficit and debt situation turns out to be," said Rep. Steve Womack, R-Ark.