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[NEW YORK] House Republicans are talking with President-elect Donald Trump's transition team about how to fashion the biggest US tax overhaul in three decades, the chairman of the House Ways and Means Committee says.
"We're talking to the Trump team about timing" for producing written legislation that would slash tax rates on businesses and individuals and remake the US tax code next year, said Kevin Brady, the Texas Republican who chairs the House's tax-writing panel.
"We're writing provisions of the bill as we speak."
Mr Trump and House Republicans, led by Speaker Paul Ryan, want dramatic rate cuts. They also want to scrap features of US tax law that they say put American companies at a disadvantage globally - and have spurred companies to leave as much as US$2.6 trillion in profit overseas, where it remains untaxed.
"I'm here to tell you tax reform is going to occur in 2017," Mr Brady said Tuesday in Washington at a conference of tax professionals sponsored by Bloomberg BNA and KPMG LLP.
While Mr Trump's plan differs in some ways from a tax-overhaul "blue print" that Mr Brady and Mr Ryan released in June, the two plans "are kissing cousins," Mr Brady told reporters after his speech.
Asked if there were any aspects of the House plan that would be a "no-go" for negotiating with Mr Trump's team, Mr Brady said no.
"It's all go-go on tax reform," he said.
Both plans seek to lower the 35 per cent corporate tax rate, the highest in the industrialised world, though companies typically pay far less by using tax credits and other strategies. Mr Trump wants a 15 per cent rate, while House Republicans propose 20 per cent. For individuals, both plans call for collapsing the current seven individual tax rates to three - 12, 25 and 33 per cent. The current top tax rate is 39.6 per cent.
Both plans also call for lower tax rates on partnerships, limited liability companies and other so-called pass-through businesses. Mr Trump wants a 15 per cent rate; the House plan calls for 25 per cent.
Currently, the US is the only country besides the African nation of Eritrea that taxes its companies on their global profit, regardless of where it's earned. At the same time, companies can defer US tax on those offshore earnings until they bring them to the US, or repatriate them. Mr Trump has proposed a special tax rate of 10 per cent on those overseas earnings; the House plan would create two rates: 8.75 per cent for cash and cash equivalents and 3.5 per cent otherwise.
Going forward, the House plan represents a major change: Moving toward a "destination-based" approach that would apply taxes based on where goods, services and intellectual property are consumed rather than where they're produced.
Companies would no longer pay taxes based on their overseas income. The plan also calls for a "border adjustments" system that would tax US imports but not exports. (Mr Trump has called for taxing some imports from China and Mexico.)
While House leaders are talking with Mr Trump's team, Utah Senator Orrin Hatch, the Republican chairman of the Senate Finance Committee, is working on a proposal aimed at ending the double taxation of traditional corporations - first at the corporate level and then when dividends are paid out, at the shareholder level. Mr Hatch's proposal, which hasn't yet been released, would allow corporations to deduct dividends from their taxable income.
The proposal "could work with any kind of reform plan," said Mark Prater, the chief tax lawyer for the Senate panel.
"We expect to finish this proposal in short order."