Republicans unveiled a framework for tax reform Wednesday that calls for lower individual and corporate tax rates and eliminating most standard deductions, while protecting tax incentives for retirement savings.
The nine-page framework that Senate and House tax-writing committees will now use to craft legislation does not get into details or specifics on how the tax reforms will be paid for or how much it could add to the federal deficit.
Senate Finance Committee Chairman Orrin Hatch, R-Utah, said the committees will also develop additional reforms.
Mr. Hatch said Republican leaders welcome bipartisan support in the process, but Richard Neal, D-Mass., House Ways and Means Committee ranking member, said it is unlikely, for both fiscal and political reasons. The proposal "would explode our nation's deficit by believing that tax cuts pay for themselves — something that respected economists on both sides of the aisle know is simply not true or borne out by any facts," said Mr. Neal, who called it "a partisan process from the start with virtually no Democratic input."
Aimed at simplifying the tax code, the plan calls for reducing the number of individual tax brackets to three from seven, capped at 35% instead of the current 39.6%, with the possibility of a higher rate for the wealthiest. It also would repeal the estate tax.
Corporate tax rates would drop to 20% from 35%, and pass-through businesses would see their rate capped at 25% instead of the top rate of 39.6%. Deductions for interest expenses used by private equity, real estate and other businesses would be reduced.
In a letter sent late Tuesday to Republican officials in Congress and the White House, 16 Democratic House members urged the tax-writing committees to avoid mandating a shift to Roth post-tax retirement savings accounts in order to offset revenue losses from any tax cuts, saying that any projected revenue "is largely illusory" because it only looks at a 10-year budget window. "Rather than pursue shortsighted budget gimmicks that put the middle class at risk, we urge you to champion policies that strengthen and expand the retirement system based on sound policy that works for all Americans," they wrote.