The GOP tax reform framework, slated for a Wednesday unveiling, will likely allow Congress the latitude to establish a top individual tax rate above the 35 percent GOP leadership has advocated for in recent weeks.
While the framework is not expected to identify the specifics of the individual top rate, it will allow Congress the opportunity to propose a top rate above the previously proposed 35 percent, two sources familiar with the discussions told The Wall Street Journal.
GOP leadership was planning, as recently as Saturday, to propose a framework lowering the current individual top rate of 39.6 percent to 35 percent and collapsing the seven existing income brackets down to three. The upcoming framework will give Congress the latitude to create a fourth income tax bracket for the highest earners that carries a tax rate of over 35 percent.
This revelation comes hours after reports indicating that the “big six” tax negotiators agreed to increase the bottom individual tax rate from 10 to 12 percent and double the standard deduction.
The recent shifts occurred as Republican leadership struggles to fit a proposed $5 trillion in tax cuts over the next ten years into a budget resolution plan that allows for only $1.5 trillion in cuts. The $1.5 trillion limit is the product of an agreement reached among lawmakers on the Senate Budget Committee that will limit Republican options as their tax reform bill must comply with the guidelines established in the budget resolution package.
“To fit every policy you want, you need a full-size SUV, but at best you have a midsize crossover,” Sage Eastman, a former Ways and Means GOP aide, told The Wall Street Journal. “Some stuff just isn’t going to fit, no matter how much cramming you do.”
The increased individual top rate may have been included in a bid to close the yawning budgetary gap produced by ambitious rate cuts and a lack of revenue bolstering countermeasures. The increased rate for the highest individual earners will also likely help endear the White House to the new framework, as it lends credibility to Trump’s insistence that the bill will not amount to a tax break for the wealthy.
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