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US House GOP has votes to pass tax cut bill, Brady says

The US Senate tax-writing committee began hammering out the details of its tax cut proposal on Monday. The House may vote on its bill as soon as Thursday.

[WASHINGTON] The US Senate tax-writing committee began hammering out the details of its tax cut proposal on Monday. The House may vote on its bill as soon as Thursday.

There may be minor revisions to the bill, but that would be the extent of it, according to House Ways and Means Chairman Kevin Brady.

"We don't anticipate major changes," Mr Brady, a Texas Republican, told reporters on Monday. "A lot of the work's been done."

Mr Brady added that he's told Senate lawmakers that preserving the deductions for property taxes up to US$10,000 is a top priority for the House. The Senate tax proposal calls for fully repealing state and local tax deductions, which includes property taxes.

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President Donald Trump will speak about taxes with a full conference of House Republicans on Thursday morning, according to Raj Shah, a White House spokesman.

The House could vote as soon as Thursday on its tax bill. Mr Trump plans on speaking to the conference beforehand about the need for tax cuts to boost the economy and make business more competitive, Shah said.

Majority whip Steve Scalise of Louisiana said that GOP leaders would work to win over rank-and-file Republicans Monday evening. More changes to the House bill could still come before the planned floor vote this week.

If GOP leaders need to make last-minute changes to guarantee enough Republican "yes" votes, they could stick in a manager's amendment in the Rules Committee, which is scheduled to consider the bill on Wednesday.

Senate Finance Chairman Orrin Hatch said his panel has "some work to do" to ensure its tax plan will conform with Senate budget rules and provide permanent tax cuts for businesses. But as the committee convened to consider its legislation, he pledged that it would succeed.

The Senate plan would increase the federal deficit by about US$1.5 trillion in its first decade, according to an official estimate. Unless lawmakers eliminate the red ink beyond that - a tall order that would require major changes - the legislation would be subject to a 60-vote threshold under Senate rules. That could doom the measure, since Republicans control only 52 seats in the chamber. An alternative would be to sunset some of the provisions after a decade.

"The mark, as originally introduced, leaves us with some work to do in order to make the reforms permanent, particularly on the business side where job creators need to be able to plan many years into the future," Mr Hatch said during opening remarks Monday afternoon. "We are, of course, aware of this problem and are working to ensure that the reduced rates and additional reforms designed to bring investment back to the United States and create more American jobs remain in place past the 10-year budget window."

Mr Hatch's plan seeks to shore up some revenue by fully repealing state and local tax deductions, delaying a corporate rate cut to 20 per cent by a year and stopping short of repealing the estate tax. But the plan needs more to comply with Senate budget rules - it's estimated to cost US$1.496 trillion over a decade, and US$217 billion in year 10, according to the Joint Committee on Taxation.

Senator Ron Wyden, the panel's top Democrat, blasted GOP leaders' process of crafting the bill as a partisan "farce" and labeled their statements about its benefits - including higher wages - as "trickle-down fantasy math."

A nonprofit group that spent more than US$18 million to defeat Hillary Clinton in 2016 is turning its sights to Republican House members in high-tax states, including New York and New Jersey, saying it will be "counting on" them to support GOP tax legislation.

House leaders plan to hold a vote on their bill - which includes new limits on tax breaks for people in such states - as early as Thursday. Some members from New York, New Jersey and California have expressed concerns.

The 45Committee, which has links to big Republican donors, is spending US$2 million on its advertising effort, which will be aimed at 30 House members, according to Brian Baker, the group's president. The spend includes television, radio and digital ads.

The House bill would end existing federal deductions for state and local income taxes and sales taxes. It would preserve a property tax deduction, capped at US$10,000. Meanwhile, a Senate plan that's being debated this week by the Senate Finance Committee, would fully repeal each of the deductions.

House Ways and Means chairman Kevin Brady of Texas has said the House of Representatives wouldn't accept a bill that fully eliminates deductions for all state and local taxes as the Senate's does.

Some of the members who'd be targeted in the ads are Jeff Denham, Darrell Issa and Steve Knight of California; Leonard Lance and Chris Smith of New Jersey; and Dan Donovan, John Faso, Claudia Tenney and Lee Zeldin of New York, according to news releases from 45Commitee.

Of those, at least four - Mr Issa, Mr Lance, Mr Zeldin and Mr Donovan - have said they plan to vote no on the House bill.

The television ads say voters elected the lawmaker to cut taxes, then tout benefits from overhauling taxes, including from increased economic growth. The ads also cite figures from the Tax Foundation, a conservative-leaning policy group, that show the average benefit to a family in the member's state. Unmentioned is the state and local tax deduction issue.

"All of our efforts are part of a previously announced US$10 million effort to pass tax reform," Mr Baker said in an interview, adding that the group has also run tax-related issue ads in West Virginia, Indiana and North Dakota. President Donald Trump won all three states in 2016, and each of them have Democratic Senate incumbents facing voters in 2018.

The 45Committee and a connected super-political action committee combined to spend US$45.5 million in the 2016 election cycle, with US$42.2 million of that amount targeting Mrs Clinton. Since the election, the group has supported Mr Trump's administration. It spent about US$4.5 million pushing the Senate to confirm cabinet nominees James Mattis, Elizabeth DeVos and Tom Price and Neil Gorsuch to the Supreme Court, according to Mr Baker.

The 45Committee isn't required to disclose donors, but the super-PAC, Future45, does. In 2016, billionaire casino operator Sheldon Adelson and his wife Miriam Adelson gave US$20 million.

Linda McMahon, now Mr Trump's Small Business Administrator, gave US$1.2 million. And TD Ameritrade founder Joe Ricketts gave US$1 million.

Mr Baker would not say whether the same individuals have supported 45Committee.

President Donald Trump repeated his call for Congress to repeal the Obamacare law's requirement that individuals purchase health insurance - and said the resulting savings could help offset a rate cut for top earners.

The Congressional Budget Office has estimated that repealing the so-called individual mandate would generate US$338 billion over 10 years. That's because an estimated 13 million Americans would forgo insurance in 2027 and the government would no longer have to subsidise their coverage, according to the CBO.

"I am proud of the Rep House & Senate for working so hard on cutting taxes (& reform.)," Mr Trump said on Twitter on Monday morning. "We're getting close! Now, how about ending the unfair & highly unpopular Indiv Mandate in OCare & reducing taxes even further? Cut top rate to 35% w/all of the rest going to middle income cuts?"

Offering a rate cut to the highest earners departs from Mr Trump's previous comments - in which he's said he wants to focus on middle-class cuts and isn't concerned about tax cuts for the highest earners.

The current top individual income tax rate is 39.6 per cent for individuals earning more than US$418,400 and for couples earning US$470,700 or more. The tax bill that's under consideration in the House would leave that rate in place for individuals earning more than US$500,000 a year and couples earning more than US$1 million. The Senate plan would cut the top rate to 38.5 per cent and apply it to the same income thresholds as the House.

A new study by Congress's official tax scorekeeper suggests that in 2019, households earning US$1 million a year or more would get an average tax cut of about US$58,000, while those earning between US$50,000 and US$75,000 would see an average tax cut of about US$688.

Those amounts, based on a Saturday report from the Joint Committee on Taxation, contradict President Donald Trump's repeated assertions that the GOP tax plan would benefit the middle class but not the highest earners.

"Our framework ensures that the benefits of tax reform go to the middle class, not the highest earners," Mr Trump said last month in Pennsylvania, before either the House or Senate had released actual legislative plans. Since then, his Twitter posts on taxes haven't failed to mention cuts for the middle class.

Several recent studies show that plenty of benefits would go to the highest earners - and some middle-class taxpayers might actually pay more.

Both findings complicate Republicans' messaging about their plans. Already, both Senate Majority Leader Mitch McConnell and House Speaker Paul Ryan have walked back guarantees that no one in the middle class would see a tax increase under their plans.

"You can't guarantee that absolutely no one sees a tax increase," Mr McConnell told the New York Times on Friday. And an aide for Ryan told the Washington Post that he misspoke when he said during a radio interview last week: "So actually, even though there's a lot of false information out there, everybody gets a tax cut." In reality, both measures call for eliminating tax breaks that might raise taxes for some middle-class taxpayers - depending on their situations.

On Friday, the conservative-leaning Tax Foundation found that the top 1 per cent of earners - who earned US$480,930 or more in 2015, according to federal data - would see an average increase in their after-tax income of 7.5 per cent from the Senate plan in 2018. The 2018 increase for the bottom 80 per cent of taxpayers - those who earned less than US$93,212 in 2015 - would range from 1.1 per cent to 1.9 per cent, according to the policy group's report.

By 2027, that trend would be largely reversed, the Tax Foundation said - chiefly because of economic growth that would result from the changes to tax laws. But economists disagree on how to determine the amount of such growth, or how it would affect different income segments.

Overall, the Tax Foundation's study found that the Senate bill would lead to a long-term 3.7 per cent increase in gross domestic product, spurring a 2.9 per cent increase in wages and 925,000 new jobs. It would also cost US$516 billion over a decade - after allowing for economic growth, the study said.

The JCT's Saturday report also indicated that the Senate plan would tend to do better by lower-income groups over time - but it's a difference of degree.

In 2027, the JCT report suggests, those earning US$1 million or more would get an average tax cut of about US$37,264, while the middle-income group - $50,000 to US$75,000 - would get an average tax cut of US$753.

People over 50 would no longer be able to make excess contributions to workplace retirement plans from their pretax earnings under an amendment that was filed by Senate Finance chairman Orrin Hatch ahead of the tax markup Monday.

The amendment would raise the "catch up" contributions to retirement savings plans under section 401(k), 403(b) and 457(b) to US$9,000, but require that they be Roth only.

Currently, almost all employers offering 401(k) plans allow eligible workers age 50 and over to make additional contributions, which are capped US$6,000 for 2017, on top of the standard US$18,000 limit.

The Senate tax proposal released on Thursday would already restrict employees earning at least US$500,000 from making the catch-up contributions to 401(k) workplace retirement plans.

Mr Hatch has offered a second amendment that would prohibit the reclassification of Roth IRA contributions as traditional IRA contributions.

The amendments are among 355 that have been filed by Republicans and Democrats on the tax writing panel. Not all will necessarily be attached to the bill before it's voted on, but having filed them gives senators the option to do so.

Both amendments are designed to reduce the amount by which the tax cuts would increase the federal deficit.

n The House and Senate are on a collision course over one of the most prized individual breaks in the tax code.

The Senate Finance Committee will start debating late Monday afternoon the 247-page tax proposal released last week by Chairman Orrin Hatch. As of now, the "conceptual" mark has some significant differences with the tax bill the House Ways and Means Committee approved last week - chief among them the Senate's call for repealing the state and local tax deduction entirely.

Chairman Kevin Brady took a hard-line approach during a Fox News Sunday interview, saying the House won't accept a tax bill that eliminates the deduction entirely. The House bill retains the deduction for property taxes up to US$10,000.

House Speaker Paul Ryan has promised that the differences will be settled in a conference between the two chambers, but some House lawmakers are concerned they'll just be forced into a take-it-or-leave-it vote for a bill that looks much closer to the Senate version.

"There are going to be things that we absolutely object to" in the bill that comes out of conference, said Scott Perry, a Pennsylvania Republican and member of the conservative Freedom Caucus. "But we're going to have to look at it in its totality and say, 'Yeah I don't like it,' but you have a binary choice" to vote for or against the tax bill, Mr Perry said.

Still, Mr Perry said he'll probably end up voting for the final product because the political consequences of not passing tax legislation are too high for GOP members.

A final bill is more likely to resemble the Senate proposal, in part because the upper chamber has a slim majority and can only afford to lose two Republican senators and pass a bill without any Democratic support. The House has a wider majority and can afford up to 22 defections.

Other divisive issues between the chambers could include the top individual income tax rate, the estate tax, the effective start date of a corporate rate and levies for companies that bring offshore profits back to the US.

While House vote counters say they're confident, Republicans in high-tax states could oppose the SALT repeal, and some conservatives could balk if the estate tax is preserved, as the Senate version calls for (while doubling the current threshold for when the levy would kick in).

Another complicating factor is that the tax plans are each proceeding on parallel tracks. House GOP members may not want to take a politically painful vote when the bill is on the House floor if Senate tax writers have taken some provisions off the table.

Still, House Majority Leader Kevin McCarthy says the two-track approach is needed to get a bill completed before 2018.

"The Senate's near simultaneous action shows how seriously this Congress is to get tax reform done this year," McCarthy said in an emailed statement. He confirmed that the House plans to vote on the tax bill this week.

After the Senate Finance Committee markup, the panel will release legislative text and vote on the measure by the end of the week, according to Mr Hatch.

The Senate Finance Committee will begin debating the tax bill at 3pm on Monday, in a markup that is expected to stretch out for several days and could feature votes on numerous amendments.

Potential amendment related to the tax treatment of carried interest. The break for investment managers is likely to change in the Senate, even though the chamber's current tax proposal doesn't call for it, according to Pat Toomey of Pennsylvania and Chuck Grassley of Iowa.

On the House side, Majority Whip Steve Scalise said that GOP leaders would work to win over rank-and-file Republicans Monday evening. More changes to the House bill could still come before the planned floor vote this week.

If GOP leaders need to make last-minute changes to guarantee enough Republican "yes" votes, they could stick in a manager's amendment in the Rules Committee, which is scheduled to consider the bill on Wednesday.

Treasury Secretary Steven Mnuchin stood by President Donald Trump's declaration that the Republican plans working their way through the House and Senate will deliver the biggest US tax cuts ever during an interview Sunday. But the math says otherwise.

The Joint Committee on Taxation released a study on Saturday night showing the Senate plan would hand households earning US$1 million or more a year an average tax cut of US$58,000 in 2019. Those earning between US$50,000 and US$75,000 would see an average cut of about US$688.

The Senate Republican tax proposal would cost US$516 billion over a decade after assuming macroeconomic benefits as a result of the tax cuts, according to an analysis by the Tax Foundation, a right-of-centre Washington think tank.