House GOP's plan for long-promised tax overhaul: What to know

The Washington Post via Getty Images

The Republican congressman from Overland Park, Kansas, met last week at the White House with Ivanka Trump, who had been advocating to double a different child-related tax credit from $1,000 per child to at least $2,000 per child. "It's the challenge of a generation". With few big corporations based in his district, Byrne said the corporate tax cuts proposed in the GOP bill won't do his constituents much good. "It'll be the biggest tax event in the history of our country".

House Republicans on Thursday released their highly anticipated plan to reform the USA tax code - which aims to cut the corporate rate and reduce the number of tax brackets.

Earnings held in cash would be taxed at 12 percent while profits invested in less liquid assets like factories and equipment face a 5 percent rate, according to the legislation released Thursday.

Democrats have repeatedly complained the plan was too favorable to business and the wealthy, and contradicted Trump's rhetoric of bringing tax relief and economic benefit to the stressed middle class. By requiring companies to pay taxes on their past overseas profits, the measure would address a loophole of the US corporate code that has allowed multinational firms to hoard their foreign earnings offshore - beyond the government's reach. At the moment, only estates worth over $4.49 million faced the estate tax.

Other state and local deductions, including income and sales tax deductions for individuals, will be eliminated.

The bill emerged from tense negotiations among Republicans as the party struggled to find ways to pay for tax cuts and limit a resulting increase in the deficit to $1.5tn - a threshold below which they can pass a bill without Democratic votes.

The top corporate tax rate would be reduced from 35% to 20%, and companies would be able to write off investments in new equipment immediately.

"What we are seeing today is a plan that exacerbates the unfairness and inequality in our tax code", said top Senate Democrat Chuck Schumer of NY. But the bill does not change or eliminate carried interest, which is also used by some real estate developers.

Additionally, the home mortgage interest deduction for newly purchased homes would be maintained up to $500,000.

The package will reportedly limit the corporate interest deduction to 70% of interest paid on debt. Make one of your most important contributions of the year-now. The GOP plans to allow state and local property tax deductions up to $10,000.

Democrats say the process is being rushed and asked in a letter Wednesday that Brady postpone a hearing on the bill set for Monday in the Ways and Means Committee.

But those mortgages are most common in solidly blue states.

The National Federation of Independent Business, the influential small business lobby, also came out against the bill.

The House bill would also slash the number of income tax brackets from seven to four: 12 percent, 25 percent, 35 percent and 39.6 percent.

Meanwhile, it was looking increasingly likely there would be no changes to 401 (k) plans for middle-class families.

The plan repeals the Alternative Minimum Tax, which mostly hits higher income taxpayers by reducing the value of other deductions in the code. Allen went so far as to claim the bill would add 20 million new jobs.

Some rank-and-file members from high-tax states like NY and New Jersey had soured on a plan to curb local tax deductions as a way to help cover the cost. By delaying a full repeal, House lawmakers may be signaling to their Senate colleagues that they're open to keeping the tax in some form. "It looks like the programs that will get cut would be the ones that help poor people more than rich people". They already have a $0 federal tax liability.

The current child tax credit is expanded from $1,000 per child to $1,600 per child. Tax-cut activist Grover Norquist of Americans for Tax reform said the measure was "long overdue" and offered "great news for taxpayers and those left behind by eight years of slow growth under Obama".

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