WASHINGTON – Senate Republicans are forging their own path on the effort to overhaul the U.S. tax code, preparing a plan that would delay President Trump’s top business priority and blow up House Republicans’ carefully crafted compromise on state and local tax deductions.

GOP Senate leaders on Thursday plan to unveil legislation that would delay cutting the corporate tax rate from 35 percent to 20 percent until 2019, four people briefed on the planning said. That’s a major departure from Trump’s insistence on immediate tax cuts that he says are necessary to spur the economy.

The one-year delay would lower the cost of the tax bill by more than $100 billion, and negotiators are trying to preserve as much revenue as they can for other changes. But it could also delay decisions by companies to move back to the United States from overseas or prompt them to hold off on other decisions as they wait for the corporate rate to fall.

To try to prevent companies from waiting until 2019 to invest, Senate Republicans plan to allow companies to immediately deduct all capital investments in 2018, the people said.

Some Senate Republicans objected internally to the one year delay, but they were overruled.

The Senate approach is much different than that of House Republicans, who are advancing a bill that would lower the corporate tax rate in 2018. But the House leaders are also having problems with the total cost of their bill, which has ballooned beyond the $1.5 trillion price ceiling needed to get the bill through the Senate.

On Thursday, House Ways and Means Committee Chairman Kevin Brady, R-Texas, released new revisions to his tax plan mean to eliminate a $74 billion shortfall and address other issues to smooth the bill toward passage.

To offset the various revenue-losing provisions in the amendment, House tax writers opted to increase tax rates on foreign assets moved back to the United States by multinational corporations. The previous five percent tax on fixed assets would rise to seven percent, while a 12 percent tax on cash held abroad would jump to 14 percent.

The House revisions would also direct further benefits to middle-class taxpayers, including by restoring the Child Adoption Tax Credit left out of the previous version and a deduction for moving expenses available to active-duty military members.

Other changes in the House bill are directed at businesses, including a further rate reduction for certain qualified “pass-through” firms that send their earnings to their owners to be taxed as individual income.

Treasury Secretary Steven Mnuchin said in a Bloomberg interview Wednesday that the White House’s “strong preference” would be for the tax cut to go into effect next year, but the White House is not expected to threaten to block the bill over this change, those briefed on the planning said.

There are other notable differences between the Senate and House bills.

In a break from the House plan, which kept the top marginal income tax rate at the current 39.6 percent, the Senate bill would slightly lower it to 38.5 percent – a win for advocates of supply-side economic theory who believe that a lower top rate will increase investment.

The Senate plan would also keep the mortgage interest deduction largely intact, capped at the current level of $1 million, according to a Republican official who spoke on the condition of anonymity because the official was not authorized to speak publicly. In the House bill, people would only be allowed to deduct interest payments on their first $500,000 worth of home loans, a proposal that generated fierce opposition from the housing industry.

The Senate plan would also eliminate a provision that allows people to deduct state and local taxes on their federal tax returns. This change would raise around $1 trillion in revenue over 10 years and help Republicans offset other components of their tax bill, such as the lower tax rates they plan to pursue for businesses and individuals.

But it would also disproportionately affect residents of high-tax states like New York, New Jersey, California and Illinois – complicating House Republicans’ efforts to unite members behind their plan.

House tax legislation authors initially planned to entirely eliminate the state and local deduction in their tax bill, but after GOP lawmakers from such states revolted, a compromise was reached. The current House bill would now allow taxpayers to deduct up to $10,000 in property taxes but no longer allow state income tax deductions – a deal that was able to win over lawmakers from high-tax districts.

The Senate has very few GOP members from states with high state and local taxes, as such states tend to go Democratic in statewide elections.

The proposal to eliminate that deduction in the Senate bill would only apply to individuals and families, whereas businesses would still be allowed to deduct state and local taxes, as these would be protected as a business expense. Such a difference could further inflame Democrats, who have criticized the GOP tax cut effort as offering too many benefits for companies and stripping benefits away from individuals and families.

Among other differences, the Senate bill will retain seven income brackets for families, while the House bill proposes collapsing the existing seven brackets down to four.

The Senate bill would also continue allowing people to claim a tax credit for adopting children, to deduct payments on student loan interest and to deduct some medical expenses – a provision dropped from the House plan that could lead to significantly higher taxes for many households, particularly for the elderly.

Another revision to the House bill that Brady released Thursday appears to dramatically change the rules on what sort of political activities a tax-exempt nonprofit organization may engage in. Language that applied only to religious organizations, giving them a freer hand to speak out on political campaigns, was broadened in the new amendment to include all 501(c) (3) organizations.

The new Senate measure brings the broad GOP tax cut effort into sharper focus. Republicans are trying to rush a tax bill into law with little debate because they want to prove to voters they can deliver on major campaign promises before the end of the year.

They have also said a giant tax cut bill will spur more economic growth, add jobs and boost wages.

But the proposed tax plans would also slash a number of tax breaks used by families and businesses and – according to numerous estimates – add at least $1.5 trillion to the federal debt, which could create a drag on economic growth.

The House bill would immediately cut the corporate tax rate to 20 percent, offer families a five-year “flexibility credit” of $300 per parent, and expand the child tax credit. It would also collapse the seven income tax brackets paid by families and individuals down to four brackets, only taxing income above $1 million at the highest rate of 39.6 percent.

The House and Senate must pass matching bills before they can send the measure to President Donald Trump to sign into law.

Republicans control 52 votes in the 100-seat Senate, meaning they can only lose two members if they want to pass a bill without Democratic support. A 50-50 tie would go to Republicans, as Vice President Pence would cast the tiebreaking vote.

It’s because of that delicate majority that many White House officials expect a tax bill – if it eventually becomes law – to more closely resemble the Senate bill. Senate Republicans will work to resolve differences among themselves in the next few weeks, but major changes made in the House could upend any agreement.

Senate lawmakers also must grapple with strict rules that regulate how a tax-cut bill is designed. To avoid a filibuster from Democrats, Republicans must write a bill that does not add more than $1.5 trillion to the debt over 10 years.

Republicans, such as Sens. Bob Corker, Tenn., Jeff Flake, Ariz., and James Lankford, Okla., have said they would not support a tax plan that adds too much to the debt, creating a bloc of votes that would be able to kill the bill if they aren’t appeased.

By Todd C. Frankel, The Washington Post

ALPHARETTA, Ga. – On the income distribution charts at the center of tax overhaul plans, Courtney Mishoe knows she’s doing well. She works as a tax manager at a firm in the Atlanta suburbs. Her husband is a police officer. Together they make more than $180,000 a year. They are solidly in the upper middle class. But they have a mortgage and three kids, including one in day care and another in high school with plans to go to college. It all adds up. They depend on tax deductions to make their budget work.

“I don’t feel wealthy,” Mishoe said. “I don’t have a bunch of money stashed away anywhere.”

Mishoe is the type of person – affluent enough for an annual family vacation but not enough for a boat or second home – who potentially stands to lose under the Republican framework for changing the country’s tax code, which threatens to eliminate or deeply cut deductions for mortgage and student loan interest and state and local taxes. These popular deductions are widely viewed as sacrosanct in high-tax, high-cost states like New York, New Jersey and California, where residents have led the fight against the proposed changes.

But what has been widely overlooked is that residents of well-to-do suburbs in red and blue states across the nation – including here just north of Atlanta – could find themselves in a similar tax squeeze. This threatens to further complicate efforts to pass a tax plan that many Republican officials view as essential after a year of legislative struggles. Both the House version, which passed out of a critical committee Thursday, and the Senate version, released Thursday, target this group of upper-middle-class Americans to raise revenue to offset other tax cuts.

The tax push illustrates the political risks of attacking provisions favored by prosperous but far-from-rich suburbanites, a powerful voting bloc that often faces the financial stress of living in increasingly pricey neighborhoods. Many in the GOP already are worried about losing their grip on this important group after Tuesday’s result in the Virginia governor’s race, where Democrat Ralph Northam crushed Republican Ed Gillespie by running up votes in the dense areas outside cities.

Alpharetta is part of a booming region known as North Fulton, where no one bats an eye at $600,000 homes, Whole Foods and West Elm are eager to locate, and property taxes are relatively high to fund the top-performing public schools that attract striving white-collar professionals. And when it comes to their taxes, residents often have more in common with people living just outside New York City and Washington, D.C., than those in other parts of Georgia.

The Republicans’ plan proposes to offset $2 trillion in tax cuts in part by going after the deductions enjoyed by the upper middle class, generally those earning $100,000 to $250,000 a year, representing about the top 80 to 95 percent of earners. The Joint Committee on Taxation found, for instance,that nearly 90 percent of the state and local tax-deduction benefit went to people earning more than $100,000. The House plans would cap the deduction at $10,000. The Senate plan is said to eliminate the deduction entirely.

In Georgia’s 6th Congressional District, which contains most of North Fulton, nearly half of tax filers took this deduction, well above the national average and on par with expensive coastal states.

“These people will probably be hit,” said Roger Lusby, a tax accountant in Alpharetta, who said he was disappointed by the Republican’s offerings. “They just don’t realize it yet.”

Rep. Karen Handel, a Republican representing the 6th District who won a closely contested special election here earlier this year, defended the plan by pointing to another Joint Committee on Taxation study that found all income groups in the nation would see lower taxes in the short term, on average. But the report did not break down the impact at the local level, and other nonpartisan research has shown that about a third of taxpayers in this income group would pay more. Handel said it was a mistake to focus on deductions.

“It’s important to look at this in the totality,” she said.

Brandon Beach, a local state senator, said he was confident that residents would see lowered individual tax bills in the final proposal.

“This is a tricky thing,” Beach said. “You’ve got to start somewhere.”

North Fulton seems like a place that could afford to pay more in taxes, but residents say their low-six-figure incomes obscure the economic challenges of living here.

A string of prosperous suburbs aligned along an eight-lane highway known as Georgia 400 that funnels cars and light-rail trains into the heart of Atlanta, the region has been transformed in the past two decades into a sought-after community with increasingly dense subdivisions and corporate campuses filled with technology and health-care firms. The headquarters of huge firms such as UPS, First Data and Veritiv are located here.

Homes nearby sell for $500,000 to $800,000. And new construction is constant, with signs in front of unfinished Craftsman-style townhouses that wishfully boast “from the mid-$500s.”

Yet, said Tracey Craft, a local real estate agent, “you can’t get them for them for anywhere near that.”

Other residents say North Fulton is a place where earning $100,000 – nearly twice the national median household income – means a surprising degree of struggle.

“Some of them are living paycheck to paycheck,” Ted Jenkin, a financial adviser, said. “You would imagine that people are fairly well-to-do even with $200,000. But they don’t consider themselves to be rich. It’s challenging.”

Lusby, the accountant, said people earning up to $250,000 in this region “don’t consider themselves to be high-earners.”

He distinguished between income and wealth. Few of his clients in this bracket were socking away much for retirement or college costs. They might have a nicer house, maybe a few extras, “but they feel like it’s all being spent and, for the most part, that’s true,” he said.

If Congress no longer allows individuals to deduct state and local income taxes, including property taxes, from their federal tax bills, it could change the calculus of places like Alpharetta. Education, funded by property taxes, is one of the region’s main selling points. Officials here credit the public schools – stocked with Advanced Placement and honors classes – with helping to persuade Mercedes-Benz two years ago to relocate its North American headquarters and 1,000 high-paying jobs from New Jersey to Sandy Springs, a town near Alpharetta in the same county.

Broadly speaking, the Republican attack on deductions is being cheered by many economists and analysts, who have complained for years that the tax code favors deductions not available to most Americans.

But where agreement breaks down is that while many in the upper middle class will be asked to pay more, the very rich won’t be.

“I do think the plan seems to be asking more from the top 20 percent,” said Richard Reeves, a senior fellow at the Brookings Institution who recently wrote a book called “Dream Hoarders,” accusing the upper middle class of gaming the system to their advantage.

But Reeves questioned a tax plan that places a greater burden on the upper middle class and delivers most of the benefits to the truly rich, the top 1 percent.

“That’s absolutely not the right way to do it,” Reeves said.

The tax plan, if passed, could further complicate the region’s reputation as a reliably Republican stronghold. The district has a long streak of sending a Republican to Congress, including Newt Gingrich and later Tom Price. President Donald Trump edged out a win in the district last fall, in a state that he won by five points.

After Price was tapped to be Trump’s secretary of Health and Human Services – a position he later resigned – a runoff election became the most expensive House race in history, when Handel narrowly beat out Democratic challenger Jon Ossoff.

In Alpharetta, many people said they could not determine how they would make out under a confusing plan littered with caps and phase-ins.

As he ate lunch at Alpha Soda, a popular local restaurant, Chris Krogh said he hadn’t followed the debate closely but was troubled by what he heard. Krogh runs a custom cabinetry business and depends on homeowners as customers.

“I always thought Republicans were supposed to be good on the tax breaks,” he said.

WASHINGTON — Senate Republicans revealed the details of their sweeping tax legislation Thursday, including a one-year delay in plans for a major corporate tax cut despite strident opposition from the White House and others in their own party. Their bill would leave the prized mortgage interest deduction untouched for homeowners in a concession to the powerful real estate lobby but would ignore a House compromise on the hot-button issue of state and local tax deductions.

On the other side of the Capitol, the House Ways and Means Committee approved its own version of the legislation on a party-line 24-16 vote, amid intense political pressure on the GOP to push forward on the first major rewrite of the U.S. tax code in three decades. It’s President Donald Trump’s top priority and a goal many Republicans believe has grown even more urgent in the wake of election losses on Tuesday that displayed an energized Democratic electorate.

Yet as the Senate Finance Committee unveiled its bill, a few stark differences emerged with the version approved by the House tax-writing committee, underscoring the challenges ahead in getting both chambers to agree on the complex and far-reaching legislation that would affect nearly every American.

The Senate measure fails to repeal the estate tax, though it doubles the size of estates exempted from the tax. It makes couples earning up to $1 million eligible for a $1,650 per-child tax credit. It creates a new 38.5 percent tax bracket for couples earning more than $1 million and individuals making more than $500,000 per year. And it takes a different approach to cutting taxes for businesses not organized as corporations that is less generous but applies to more businesses.

Democrats are strongly opposed to the GOP rewrite, so the Republicans must find agreement among themselves to have any hope of passage.

The Senate bill would fully repeal the state and local deduction claimed by many taxpayers, an idea that has drawn vigorous opposition from House Republicans in New York and New Jersey and resulted in a compromise in the House version of the bill that would allow property taxes to be deducted up to $10,000.

House Majority Leader Kevin McCarthy told The Associated Press that the Senate’s total-repeal approach would face tough sledding in his chamber. As for the hard-fought compromise, he said, “I think it’d be difficult not to have it in the final bill.”

On the other hand, the House bill would lower the cap on the mortgage interest deduction, an idea that caused intense blowback from the real estate lobby, but the Senate tax measure would leave it unchanged. That means homebuyers would continue to be able to deduct interest payments on loans of up to $1 million as permitted under current law; the House bill would reduce the limit to $500,000 for new home purchases.

The feverish efforts by Republicans in both chambers are aimed at fulfilling a self-imposed deadline to get legislation out of the House and Senate before Thanksgiving so the period between then and Christmas can be devoted to reconciling the two versions. But the Senate already seems unlikely to meet that deadline because of complex rules governing how it must consider the tax bill.

In one provision sure to cause a major dispute, the Senate measure includes a one-year delay in lowering the corporate tax rate, which is to be cut from 35 percent to 20 percent. Delaying that reduction would lower the cost of the bill to the Treasury, but the delay is opposed by the White House and some Senate Republicans.

“The president would like this to go into effect right away,” Treasury Secretary Steven Mnuchin said Thursday on Fox Business Network.

Other obstacles remain, among them a band of deficit hawks in the Senate who are unhappy about the $1.5 trillion the legislation would add to the national debt over the coming decade.

“I remain concerned over how the current tax reform proposals will grow the already staggering national debt by opting for short-term fixes while ignoring long-term problems,” said Sen. Jeff Flake, R-Ala. “We must achieve real tax reform crafted in a fiscally responsible manner.”

The House and Senate bills are broadly similar in their outlines. Both would drastically reduce the corporate tax rate and also lower rates for individuals, while eliminating deductions claimed by many people.

The House version would collapse the current seven tax brackets into four, while the Senate would retain seven. The House bill would entirely eliminate the estate tax, while the Senate version would retain it while doubling the exemption level. Both versions would retain an adoption tax credit that had initially been eliminated in the House bill, but that adoption advocates fought to restore.

Both would increase a child tax credit, though not to levels sought by Sens. Marco Rubio and others, an indication of how individual provisions will need to be negotiated with one lawmaker after another in the weeks to come. House Republicans appear on track to pass their version of the bill next week, but in the Senate Majority Leader Mitch McConnell has a slim 52-48 majority that has proven difficult to corral.

Democrats are angrily opposed to the GOP rewrite, arguing it’s a giveaway to the rich and corporate America. Republicans contend that the tax reductions will help the middle class, even though some independent analyses have found that the wealthy and corporations benefit disproportionately.

The tax bill must deepen federal deficits by no more than $1.5 trillion over the coming decade. If Republicans don’t meet that, the measure would be vulnerable to a bill-killing Senate filibuster by Democrats that GOP senators lack the votes to block. It also cannot add to red ink beyond the first 10 years without facing the same fate.

Associated Press writers Alan Fram and Erica Werner contributed to this report.

WASHINGTON — A comparison of a Republican-written tax bill approved Thursday by the House Ways and Means Committee and another being proposed by GOP members of the Senate Finance Committee:

–Personal income tax rates: House condenses current seven brackets to four: 12, 25, 35 and 39.6 percent. Senate retains seven brackets but changes them to 10, 12, 22.5, 25, 32.5, 35 and 38.5 percent. Under current law, top bracket is 39.6 percent.

–Standard deduction: Is currently $6,350 for individuals and $12,700 for married couples. House, Senate would both raise those levels to $12,000 for individuals and $24,000 for couples.

–Tax credits: House raises per-child tax credit from $1,000 to $1,600, extends it to families earning up to $230,000. Creates a $300 tax credit for each adult in a family, which expires in 2023. Senate raises per child tax credit to $1,650 and raises income limit of families who qualify to $1 million. Both bills preserve adoption tax credit, which House bill initially eliminated.

–Home mortgage interest deduction: House would limit the deduction to the first $500,000 of the loan. Senate would retain the current $1 million ceiling.

–Other deductions: House reduces allowable charitable deductions and eliminates medical expense deductions. Senate does neither.

–State and local taxes: House ends deductions for state and local income and sales taxes, allows it for up to $10,000 in property taxes. Senate eliminates entire deduction.

–Alternative minimum tax: House, Senate both repeal the tax aimed at ensuring that higher-earning people pay at least some tax.

–Inheritance tax: When someone dies, the person inheriting the estate currently must pay taxes on its value above $5.5 million for individuals, $11 million for couples. House bill initially doubles those limits and repeals the entire tax after 2023. Senate doubles the exemptions but does not repeal the tax.

–Individual mandate: Neither chamber repeals the requirement in President Barack Obama’s health care law that people pay a tax penalty if they don’t purchase health insurance.

–Corporate taxes: House, Senate both reduce current 35 percent rate to 20 percent, but Senate has one-year delay in dropping that rate.

–Pass-through businesses: Millions of U.S. businesses “pass through” their income to individuals, who then pay personal income tax on those earnings, not corporate tax. House bill would tax many of them at 25 percent, plus creates 9 percent rate for the first $75,000 in earnings by some smaller pass-throughs. Senate bill would let people deduct some of the earnings and then pay at their personal income tax rate on the remainder.

–Businesses: House, Senate both expand write-offs allowed companies that buy equipment.

–Multinational corporations: House levies 10 percent tax on profits for overseas subsidiaries of U.S. corporations, and seeks to eliminate tax incentives that encourage some U.S. companies to move overseas. Senate ends tax advantages for firms moving overseas.

Out in the Hamptons, Wall Street’s favored beach resort on Long Island, brokers and buyers already have a workaround for a tax-plan provision under consideration in Congress that would take away the mortgage-interest deduction for second homes.

A client of Brown Harris Stevens broker Jessica von Hagn who works at a hedge fund decided to turn the vacation home he’s buying into an investment property by setting up a limited liability company. That will allow him to deduct the interest and earn rental income at the height of the season from the modern home on Bridgehampton’s Lumber Lane, with four bedrooms, three baths and a swimming pool on an acre of land.

For the buyer: problem solved. For the Hamptons market: more high-end vacation properties getting listed as rentals, more competition and, most likely, falling rents.

“If you aren’t able to take advantage of the mortgage deduction for your second home, you’ll see more people putting their homes on the market and the inventory will grow,” von Hagn said. “There’s only a certain number of renters every season and we just keep adding more and more inventory.”

In second-home markets across the U.S., from Cape Cod in Massachusetts to Lake Tahoe, California, brokers are bracing for a hit. A House version of the tax plan, passed by the Ways and Means Committee on Thursday, cuts the mortgage-interest deduction on second homes, and on home-equity loans, which buyers sometimes take out on their primary residence to pay for a vacation property. The Senate’s plan, details of which were released late Thursday, also does away with the home-equity deduction, but preserves the break for second-home mortgages.

Should the final bill eliminate the tax deduction for vacation properties, the workaround — acquiring the home as an investment property — changes the nature of the purchase for buyers, turning their vacation home into a business. Second-home buyers typically purchase properties within 200 miles of their primary residence, and 72 percent of them finance the purchase, according to the National Association of Realtors.

“It’s a shift from favoring owners to favoring landlords,” said Danielle Hale, chief economist for Realtor.com. “It adds rental inventory and reduces the time people spend at second homes potentially.”

If markets are flooded with properties for lease, rents will fall and so will values for those homes, she said.

The main focus of the tax debate on real estate has so far centered on mortgage-interest deductions for primary residences. The Senate version of the plan would preserve the existing write-off for up to $1 million of debt, while the House would reduce it for new purchases to $500,000 of debt.

Even before any change is passed by Congress, the possibility that the second-home mortgage deduction will be gone is already changing the calculus for some buyers, said Timothy Bailey, a broker with John C. Ricotta & Associates Inc. in the affluent Cape Cod town of Chatham.

Bailey said an agent told him that one of her deals, for a $1.5 million vacation property, fell apart over the tax plan.

“My whole living relies on selling second homes,” Bailey said. “Because it’s a discretionary purchase, if they lose that deduction, it might be more attractive to rent.”

The biggest impact will be felt at the lower end, for homes costing less than $2 million, according to brokers. At higher price points, buyers may pay cash or opt to take advantage of other tax benefits, such as buying the homes as investment properties, writing off upkeep and interest, and using them part of the year for themselves.

In Aspen, Colorado, as much as 70 percent of second homes are purchased with cash, so the interest deduction is irrelevant, said Tim Estin, a broker with Aspen Snowmass Sotheby’s International Realty.

“Our market relies on the winds of the ultra-rich, who will be getting a reputed tax break anyway that should more than make up for the loss of the mortgage deduction,” said Estin, who writes the Estin Report on the Aspen market. “For the rich, a mortgage is more a source of cheap funds — bankers line up to loan them real estate money in the hopes of relationship-building — and the deduction aspect is almost ancillary.”

That raises a fundamental question for Anthony Sanders, a libertarian economics professor at George Mason University in Fairfax, Virginia.

“Is that really something we should be subsidizing — vacation homes?” Sanders said. “If people can afford to buy a vacation home, they can afford not to have a deduction.”

But the lives of many middle-class Americans are made better because they have affordable vacation retreats, said Lawrence Yun, chief economist for the National Association of Realtors.

“Clearly, even though it’s discretionary spending, it’s not only on the upper end,” Yun said. For example, “there are many cabins in Michigan, and these are for middle-class families to go hunting or fishing.”

Yun said the plan also would have an economic impact on affordable second-home markets such as Murphy, a town in North Carolina’s Great Smoky Mountains, where local businesses depend on part-time residents.

Whatever happens with the tax plan, the Bridgehampton buyer isn’t worried. He’s paying more than $2 million for his 3,400-square-foot vacation home, and though he’ll end up spending less time there than he had originally hoped, he figures the rent he’ll earn will more than cover his property taxes and help pay the mortgage.

And he’ll still be able to enjoy the two-story charcoal-colored house, the landscaped yard and heated, granite pool with inlaid spa and waterfall — for at least part of the season.

WASHINGTON — Senate Republicans have run into a problem with their proposed tax cuts: Under Senate rules, the cuts would expire after 10 years.

Problem is, most economists say temporary tax cuts would swell the national debt while doing little for economic growth. And without faster growth, few individuals would stand to benefit from the pay raises and job gains being promised by President Donald Trump and Republican congressional leaders.

“We have identified this consistently as one of the fundamental principles of tax reform,” said Jared Walczak, a senior policy analyst at the conservative Tax Foundation. “Any time you build in a sunset, you’re encouraging businesses to not make the long-term investments.”

Businesses that are considering making investments that might span decades, for example, would need to know that the Republicans’ proposed 20 percent corporate tax rate won’t jump back up to the current 35 percent in a few years.

It is a theory rooted in the work of Milton Friedman, the Nobel Prize-winning economist who argued that individuals and businesses make economic decisions based on what they expect their net income to be over the long run. And that expectation depends, in part, on tax rates.

Though Republican leaders accept this theory, they have yet to show that they could make their tax cuts last beyond 2027. Enacting permanent tax cuts that that would raise the deficit after a 10 year-period would need 60 votes in the Senate. So instead, Republicans intend to cut taxes with a simple majority that wouldn’t require Democratic votes.

Within the 10-year period, its budget would allow the Senate to add up to $1.5 trillion to the national debt. Beyond 10 years, they couldn’t add any debt. So the tax cuts would expire if not paid for.

Temporary tax cuts, Republican leaders concede, wouldn’t achieve the key economic benefits that Trump has said would flow from their bill: Sustained annual economic growth above 3 percent and yearly income gains averaging of $4,000 per household.

“These reforms — these tax cuts — they need to be permanent,” House Speaker Paul Ryan said in a speech last summer. “Every expert agrees that temporary reforms will only have a negligible impact on wages and economic growth. Businesses need to have confidence that we will not pull the rug out from under them.”

But most economists say the tax cuts wouldn’t pay for themselves. So making them permanent would entail further costs. And a steady shortfall in tax revenue could force deep spending cuts to many popular programs involving college, housing or medical aid, among other areas. Or it could require tax hikes. Or the debt could grow and potentially send interest rates up, thereby making it costlier for people to borrow to buy a home or car.

“We should have stability in our tax code, and this introduces instability in multiple ways,” said Jason Furman, a professor at Harvard University and formerly the top economist for President Barack Obama.

The potential consequences of the Senate plan released Thursday are still being calculated. But if the tax cuts in the House plan were made permanent, the national debt would surge by at least $6.3 trillion through 2040, according to an analysis by the Penn Wharton Budget Model. This, in turn, could create an additional drag on the economy because a rising debt makes it harder to accelerate growth.

What lawmakers may or may not do to preserve the tax cuts is one of the unsettled and unsettling questions going into the Senate Finance Committee’s work of the proposal next week.

“We are still working through some details on that,” Republican Sen. Pat Toomey of Pennsylvania told reporters Thursday.

Congressional estimates project the yearly deficit from the tax cuts rising to nearly $220 billion in 2027. Congress could cut all discretionary funding for the Education Department, the Environmental Protection Agency and the Department of Housing and Urban Development and still make it only about halfway toward covering the cost of the additional debt.

Toomey, a member of the Finance Committee, said his goal was to permanently set the corporate tax at 20 percent and establish an international system designed to tax business profits primarily within the United States rather than globally.

He said his preferred way of making the tax cuts permanent would involve scrapping the requirement in the 2010 health care law that Americans buy health insurance or face a tax penalty. This is politically risky given that the Senate tried and failed this year to repeal and replace the health insurance law.

On Wednesday, the Congressional Budget Office estimated that eliminating the individual mandate would save $54 billion in 2027. But it would also deprive 13 million people of health insurance.

There’s also the possibility that Republicans might not pass permanent tax cuts and force Congress years later — when many current members would be out of office — to address the problem.

House Republicans have already suggested that family tax credits set to expire in their proposal after five years won’t actually sunset, because members will vote to renew them. But keeping those credits in place would mean that the national debt would exceed the $1.5 trillion limit over 10 years.

Republicans would be betting that potential tax hikes would upset voters and the economy. They saw this possibility play out during the 2013 “fiscal cliff” when tax cuts that had been enacted in 2001 and 2003 were set to expire. So President Barack Obama signed a deal that essentially preserved many of the expiring tax cuts while returning some rates to higher levels.

“One of the lessons learned from fiscal cliff is that once these tax cuts are in place for 10 years, it’s really hard to take them away,” said Rohit Kumar, a former tax counsel to Senate Majority Leader Mitch McConnell and now an executive at PwC. “Temporary is not really temporary unless you think the government is going to let the corporate tax rate and individual rates jump.”

WASHINGTON – One powerful group was noticeably scarce from the flurry of activity inside the congressional committee room where Republicans recently took a big step toward passing their sweeping tax overhaul.

The lobbyists who swarmed 1100 Longworth this week – the House Ways and Means panel room where lawmakers last tackled a tax code rewrite three decades ago – had thinned to a relative trickle. The K Street crowd chalked up their absence to new modes of communicating with lawmakers and aides.

But lobbyists also point to another big factor that could jeopardize the signature domestic push by President Donald Trump and the GOP: Republicans are moving at such a breakneck pace that corporations with billions of dollars to gain or lose from the revamp still haven’t determined their fate. That leaves them without a clear plan of action to strike out against the loss of breaks they cherish or complicated new taxes on their operations – or a game plan to rally behind changes that benefit them.

“It’s very hard to keep up with the House process and the changes in some of the most complex provisions,” said Cathy Koch, Americas Tax Policy leader at EY. “The ground keeps shifting. Many companies are still struggling to calculate the net impact on their business, their markets, their workers, and their consumers.”

The House and Senate tax measures share a focus on slashing the burden on business. But many businesses aren’t yet sold on the proposals, fracturing the traditional Republican coalition that has helped send major legislation over the finish line during previous high-profile fights. The lack of unity among would-be corporate allies could spell trouble for the tax effort at a time when Republicans, and Trump, are desperate for a legislative accomplishment they can tout on the campaign trail next year.

The GOP timeline is aggressive – the Ways and Means Committee approved its bill Thursday after it was introduced a week ago and plans to vote on the proposal next week. Senators unveiled their draft this week and say they want to pass it by the end of the year.

Trouble was evident from the start as the National Association of Home Builders and the National Association of Realtors declared their instant opposition to the House bill. The groups argue that the proposal removes incentives for owning a home in part by capping the write-off for mortgage interest and limiting the deduction for state and local taxes.

The NAHB is planning to fly more than 100 of their members to Washington next week to make its case. “We want members of Congress to look their friends in the eyes and tell them why they can’t support housing and homeownership,” NAHB President Jerry Howard said.

But the GOP scored a coup when the National Federation of Independent Business, the potent small-business lobby that initially lined up against the House bill, decided to back the version that emerged from the Ways and Means Committee on Thursday.

Chairman Kevin Brady, R-Texas, tweaked the treatment of businesses that file on the individual side of the code to make more small firms eligible for a lower rate. “We are very grateful to Chairman Brady for listening to our concerns and working with NFIB to ensure that tax reform benefits the greatest possible number of American small business owners,” NFIB President and CEO Juanita Duggan said in a statement.

Other big-business behemoths including the U.S. Chamber of Commerce, the Business Roundtable and the National Association of Manufacturers are backing the rewrite, despite some reservations.

“We never said the bill was perfect and couldn’t be improved,” Neil Bradley, the chamber’s chief policy officer, said. “But because it meets our threshold principles and is pro-growth, we’ve been very supportive. This is an all-hands-on-deck push.”

The headlong rush to passage has sidelined, for now, much of what would otherwise be – and may yet become – the bill’s corporate cheering section. “You’ve got Republican majorities in Congress and a Republican president that all came together on a framework to reform the tax code, and nobody wants to be against that,” said one lobbyist who spoke on the condition of anonymity to offer a candid assessment. “The problem is the process has really backed everybody into a corner.”

Lobbyists close to the process also note a striking lack of coordination with the administration, which under Republican control has typically played a more assertive role in rallying business community support for key initiatives. The office of House Majority Whip Steve Scalise, R-La., has instead stepped in, conducting briefings before major steps in the rollout of the plan and hosting an 8:45 a.m. daily conference call with representatives from allied conservative groups and business lobbyists.

For his part, Bradley said he doesn’t “have a ton of sympathy for those who complain about the speed. We’ve been waiting on this for 31 years. . . . This is game time and you’ve got to step it up.”

The chamber also has said that it intends to use its considerable political muscle to reward or punish individual Republican lawmakers based on how they line up. “This is pretty much a litmus test for whether or not when you have the opportunity you can deliver on pro-growth policy. . . . Failure is not an option, and we’ll hold people accountable.”

The House and Senate bills approach the $1.5 trillion limit for adding to the deficit over the next decade, a red line they can’t blow through without breaking Senate budget rules allowing the upper chamber to approve the measure without Democratic support. That equals the cost alone of slashing the corporate rate from 35 to 20 percent – which both versions, do, though the Senate plan saves $100 billion by delaying the cut for a year – meaning tax writers have had to scour the code for new sources of revenue to pay for the rest of their wish-list of cuts for other businesses and individuals.

The hunt for that money has led lawmakers into uncharted territory. The original House Republican bill included a new excise tax on payments between certain subsidiaries of multinational corporations. It raised an estimated $154.5 billion, and GOP tax writers said it would discourage globe-spanning companies from sending their U.S. profits abroad.

But an array of U.S. and foreign-based companies with extensive U.S. operations cried foul, arguing that the move would discourage investment here – and likely violate international tax treaties to boot.

Republicans on the tax-writing panel tweaked the provision twice over the course of the week.

But not enough to satisfy many stakeholders, who still remain opposed to the bill. “The way the amendment was written still violates tax treaties and reaches into global profits that other jurisdictions feel is their prerogative,” said Nancy McLernon, who heads the Organization for International Investment, which represents firms headquartered abroad with major U.S. footprints, including Anheuser-Busch, GlaxoSmithKline, Siemens and Unilever.

The process, McLernon said, is moving “way too quickly.”

Other industry groups are publicly holding their fire. Many applaud the chopped corporate rate while laboring behind the scenes to preserve favored deductions. Consumer bankers, for example, are protesting the elimination of certain write-offs, including for premiums that banks pay to the Federal Deposit Insurance Corp., and life insurers are working to defeat a move to raise taxes on their reserves.

In a characteristic statement Thursday, American Council of Life Insurers President and CEO Dirk Kempthorne thanked Republican leaders for committing to “address unintended consequences for the life insurance industry and its policyholders” and said his group would continue to work with them.

The Washington Post’s Mike DeBonis contributed to this report.

Congressional Republicans face critical decisions this week as they move within striking distance on a major legislative package to cut taxes, an achievement party leaders say is crucial to stabilizing the GOP’s recent political tailspin ahead of next year’s elections.

The House plans to vote on a GOP tax bill by week’s end that would slash taxes for companies and overhaul the tax code for virtually every American family and individual. And the Senate Finance Committee plans to vote on its version of the package within the next few days.

Stark differences between the House and Senate tax bills remain unresolved, but there is enough overlap and – so far – muted intraparty resistance, making the White House increasingly optimistic that an agreement can come by Christmas, as President Trump has repeatedly promised.

Enactment of the tax-cut package would mark Trump’s first major legislative accomplishment at a point when his job approval rating has dropped to a record low for this point in a presidential tenure.

Still, potential quagmires remain. House and Senate Republicans risk colliding over whether Americans should be able to deduct local property taxes from their federal taxable income. The House GOP bill would allow Americans to deduct up to $10,000 of those taxes from income as a way to placate complaints from conservatives in high-tax states such as New York, New Jersey and California.

In an interview on “Fox News Sunday,” Rep. Kevin Brady, R-Texas, chairman of the House Ways and Means Committee, stood firm on that provision, saying it is important to “make sure people keep more of what they earn, even in these high-tax states.”

Americans are permitted to use local property taxes as well as state income taxes to offset parts of their federally taxed income. Senate Republicans in their proposal have so far refused to allow for the deduction of any of those taxes.

Meanwhile, House and Senate bills differ importantly on how a huge corporate tax cut would go into effect. In the House GOP bill, the tax rate for corporations would fall from 35 percent to 20 percent in 2018. In the Senate bill, the tax cut wouldn’t take effect until 2019, delaying some benefits for corporations but shaving more than $100 billion off the cost of the change.

Congressional Republicans have not indicated how they plan to address this discrepancy, but finding agreement on the timing of the cuts and how to treat property tax income would resolve some of the biggest outstanding issues.

Ten months after Republicans took control of the White House and Congress, the imperative could hardly be greater for a party that repeatedly fell short of its promise to repeal and replace the Affordable Care Act.

The results of Tuesday’s election – in which Democrats swept governor’s races in Virginia and New Jersey, as well as other contests around the country – have heightened the need for the GOP to demonstrate that it can govern. So, too, has the controversy that has enveloped Roy Moore, the GOP Senate candidate in Alabama, who has been accused of making romantic and sexual advances on teenagers when he was in his 30s.

Failure to deliver on tax cuts, a growing number of Republicans say, could have consequences in races across the country next year, particularly if GOP donors close their wallets and the enthusiasm of grass-roots volunteers is sapped by the inaction.

“They have to pass something they can call tax reform or get under their desks and wait for the shelling,” said John McKager “Mac” Stipanovich, a longtime Florida-based GOP consultant. “The perceived level of dysfunction in a Republican-led Congress and the perceived level of incompetence in a Republican-led White House would have enormous consequences in the 2018 election.”

Asked Sunday about the impact of Tuesday’s Democratic victories, Marc Short, Trump’s legislative affairs director, suggested a simple antidote.

“The president and we believe that what we need to do is deliver on the tax relief that we promised,” he said during an appearance on NBC’s “Meet the Press.”

More broadly, Republicans are battling criticism that their legislation would disproportionately benefit corporations and the wealthy, giving less relief to the middle class and in some cases pushing up taxes for middle-class families.

Trump and GOP leaders have promised for months that all Americans will receive a tax cut under their plan, but in recent days, GOP leaders have conceded that these were false statements and that some people’s taxes will actually rise.

Analysts believe that most people will see their taxes fall, but millions of people will still pay more under the plans as they are currently constructed.

Democrats pounced on that notion Sunday.

“The reality is many middle-class families are going to end up paying more,” Sen. Chris Van Hollen, Md., chairman of the Democratic Senatorial Campaign Committee, told Fox News. “Folks in suburbs are going to get clobbered.”

Steven Mnuchin, Trump’s treasury secretary, stressed that most middle-income Americans will get a tax break under both GOP plans pending in Congress. But he stopped short of saying everyone would get a break.

“For most people – and, again, it may not be 100 percent, but by far the majority – both the House and Senate version provide middle-income tax relief,” Mnuchin said on CNN’s “State of the Union.”

While Republican strategists widely agree on the need to act on taxes, some fret that the party’s message has already become too muddled. Marc Rotterman, a veteran GOP consultant in North Carolina, said he would have preferred to see a less complicated bill that more closely matched Trump’s campaign rhetoric.

“This is not what a lot of us thought it would be,” Rotterman said. “I think they’re listening too much to K Street.”

But the imperative to score a win remains powerful.

Rep. Chris Collins, R-N.Y., said he’s being pressed by everyone from GOP donors to rank-and-file voters.

“Republicans of all ilk, my supporters, everyone is saying we need to get tax reform done. We didn’t get health care done,” Collins said. “The point is we’ve got to deliver this to keep our base enthused to turn out in the midterms.”

A number of Republicans are pushing for changes to the House and Senate tax bills, primarily eyeing ways to ensure that the legislation helps working families.

The Tax Policy Center found last week that most families would see tax cuts under the House Republican plan, but it did say that 7 percent of families would see tax increases in 2018 and 25 percent would see tax increases in 2027.

This increase is based in part on a House provision that expires after five years that allows each adult to claim a $300 credit against their income. House Republicans decided to cap this credit after five years in part to extend the corporate tax cut they wanted to deliver.

Rep. Warren Davidson, R-Ohio, a conservative member of the House Freedom Caucus, wrote in a Twitter post Friday that “#TaxReform that raises your taxes is the wrong direction. Still reviewing scenarios from the House and Senate bills…”

On the other side, Republican Sens. Bob Corker, Tenn., Jeff Flake, Ariz., and James Lankford, Okla., have all raised concerns about additional debt from a tax-cut measure. The House bill would add roughly $1.4 trillion to the debt over 10 years, and the Senate bill would add $1.5 trillion, according to estimates from the Joint Committee on Taxation.

Meanwhile, Senate aides are still sorting through an extremely problematic component of their tax bill.

Senate Republicans aim to pass their tax bill along party lines, without any support from Democrats, and that requires them to use a process called reconciliation.

But to pass a tax-cut bill through reconciliation, Senate rules say, the legislation cannot add to the debt after 10 years. The Senate GOP tax bill would add to the debt after 10 years, and officials have to come up with a way to address this, or the bill will essentially be disqualified from becoming law.

That leaves them with some unpopular choices. They can decide to have major parts of the tax-cut package expire after 10 or fewer years, or they can add some tax increases that would not kick in until the late 2020s, assuming Congress will eventually vote to reverse the hikes.

“If they thought they had the solution, it would have been in the” bill already, said Douglas Holtz-Eakin, a conservative economist and former director of the Congressional Budget Office.

The Washington Post’s Dino Grandoni and Mike DeBonis contributed to this report.

The wind industry blew a tentative sigh of relief last week.

The U.S. Senate’s recently released tax bill preserves key wind construction tax credits that are at risk in the House’s version, which threw the industry into a tailspin when it was released at the start of November as analysts forecast a deep cut in new wind power.

While waiting for the two bills to be meshed, a chilling effect has swept over the industry as groups remain apprehensive. About $50 billion of private investment, including $1.1 billion of projects in the pipeline in Colorado, and the jobs tied to that investment are now on shaky ground.

“We are supportive of tax reform that results in a simpler, more efficient tax code, and we commend Congress for working toward that goal,” said Frank Prager, Xcel Energy’s vice president for Policy and Federal Affairs. “The power industry is the most capital intensive in the country, and we plan to continue advocating for the right tax policy that will help us provide our customers with clean, reliable and affordable energy.”

Xcel Energy is building a $1 billion venture called the Rush Creek Wind Project that would generate 600 megawatts of power. Denmark-based Vestas, which has four manufacturing plants in Colorado, is building the 300 turbines for the project. Colorado’s 3,029 megawatts of wind provides 17 percent of the state’s electricity, which is the equivalent of powering 670,000 average American homes, according to American Wind Energy Association. There are 7,000 wind energy-related jobs in Colorado.

The heart of the concern is the Production Tax Credit, known as the PTC. It’s a 10-year tax credit for wind construction that started in 1992. In 2015, the wind industry supported a bipartisan move to phase out the PTC, starting in 2016 until it eventually drops out in 2020.

To qualify, companies can either start construction or spend 5 percent of the end total construction costs as long as the project is finished in four years. The House bill, if enacted, would retroactively change the ways projects qualify for credits. Companies that put forth 5 percent of the costs, typically done by purchasing turbines, would no longer qualify. Additionally, construction would need to be continuous, which the industry interprets as not allowing for pauses.

Many projects that already qualified for the full 100 percent tax credit could lose eligibility. The would have to requalify at a stepped-down rate of 80 percent — if they can get their projects to qualify in the last two months of 2017. If not, they would be shooting for 60 percent in 2018 or 40 percent in 2019.

Additionally, the bill lowers the value of the credit back to $15 per megawatt hour, the level set up in 1992, instead of its current inflation-adjusted $24 per megawatt hour.

The House bill says the changes to the PTC would increase revenues by $12.3 billion from 2018 to 2027.

But the changes would also cut the number of gigawatts of energy forecast by half, dropping from 38 gigawatts through 2020 to 19 gigawatts or 20 gigawatts, said Alex Morgan, a wind analyst for Bloomberg New Energy Finance. Job losses from the loss of projects would follow.

Morgan said it’s not likely that the language in the House bill will go through as is, especially since the Senate bill preserves the current PTC requirements. But it does create uncertainty for developers who want to qualify by the end of 2017.

“While this language is being hashed out and exactly what happens to the PTC is being hashed out, anyone who is making decisions for the end of 2017, they want the House and Senate decisions to be made quickly,” she said.

Tom Kiernan, CEO of the American Wind Energy Association, said if the House language were to become law, it would set a dangerous precedent of retroactive changes that could impact other industries down the line. He commended Colorado Sens. Cory Gardner and Michael Bennett, for as well as Rep. Mike Coffman, for supporting the effort to keep the PTC as is.

“(Retroactive changes are) the type of thing, in all candor, the United States doesn’t do,” Kiernan said. “We are an economy, government and rule of law that people trust. A place you can make investments and have confidence in them. This type of retroactive tax change would undermine the confidence in our economy and investments.”

WASHINGTON — President Donald Trump on Monday barged into congressional Republicans’ carefully calibrated work on revamping the nation’s tax code, calling for a steeper tax cut for wealthy Americans and pressing to add a contentious health care change to the mix.

In a tweet, Trump commended GOP leaders for getting the tax overhaul legislation closer to passage in recent weeks and said, “Cut top rate to 35% w/all of the rest going to middle income cuts?”

That puts him at odds with the House legislation that leaves the top rate at 39.6 percent and the Senate bill as written, with the top rate at 38.5 percent.

Trump also said, “Now how about ending the unfair & highly unpopular individual mandate in (Obama)care and reducing taxes even further?”

With few votes to spare, Republicans leaders hope to finalize a tax overhaul by Christmas and send the legislation to Trump for his signature. House leaders have compromised with some rank-and-file Republicans in hopes of passing their version of the bill this week. The Senate Finance Committee starts work on its legislation on Monday afternoon.

Trump’s tweet injects a degree of uncertainty in the process as the GOP tries to deliver on the president’s top legislative priority and hold onto their majorities in next year’s midterm elections.

Neither bill includes a repeal of the so-called individual mandate of Barack Obama’s Affordable Care Act, the requirement that Americans get health insurance or face a penalty. Several top Republicans have warned that including the provision would draw opposition and make passage tougher.

Underscoring the difficulty, the chairman of the House’s tax-writing committee said Sunday he was certain that chamber won’t go along with the Senate’s proposal to eliminate the deduction for property taxes, setting up a major flashpoint.

Among the biggest differences in the two bills that have emerged: the House bill allows homeowners to deduct up to $10,000 in property taxes while the Senate proposal unveiled by GOP leaders last week eliminates the entire deduction.

The deduction is particularly important to residents in states with high property values or tax rates, such as New Jersey, Illinois, California and New York. Rep. Kevin Brady, chairman of the House Ways and Means Committee, said that he worked with lawmakers in those states to ensure the House bill “delivers this relief” and that he was committed to ensuring it stays in the final package.

“It’s important to make sure that people keep more of what they earn, even in these high-tax states,” Brady, R-Texas, said during an appearance on “Fox News Sunday.”

The Senate’s tax-writing committee will wade through its newly unveiled measure starting Monday. The legislation in the House and Senate carries high political stakes for President Donald Trump and Republican leaders in Congress, who view passage of tax cuts as critical to the GOP’s success at the polls next year.

The House is expected to vote on its measure on Thursday. The House Ways and Means Committee approved it last week on a party-line 24-16 vote.

Democrats are solidly opposed to the GOP revamp, so the Republicans must find agreement among themselves to have any hope of passage.

Both the House and Senate versions of the legislation would eliminate deductions for state and local income taxes and sales taxes paid. Sen. Chuck Schumer, D-N.Y., said in response to Brady’s pledge that Republicans should fully restore what is referred to as the SALT deduction, or millions of middle-class families would end up paying higher federal income taxes, not less.

“The House’s so-called ‘compromise’ would be saying to the middle class we’ll only chop off four of your fingers instead of all five,” Schumer said in a statement.

A key feature of both bills is a reduction in the corporate tax rate from 35 percent to 20 percent. But the Senate version delays the cut for one year. Treasury Secretary Steven Mnuchin said on CBS’s “Face The Nation” that he was confident the issue would not be a stumbling block to reaching an agreement.

“Obviously we would prefer if they kicked in sooner rather than later, but we’re going to work with the Senate on that issue,” Mnuchin said.

Mnuchin also rebuffed projections that the proposed tax cuts would increase the national debt. He said that creating sustained economic growth of 3 percent or higher would generate trillions of dollars in additional revenue to the government. He did not specify over what time frame that would occur.

“This is all about growth,” Mnuchin said.

WASHINGTON — Promoted as needed relief for the middle class, the Senate Republican tax overhaul actually would increase taxes for some 13.8 million moderate-income American households, a nonpartisan analysis showed Monday.

The assessment by Congress’ Joint Committee on Taxation emerged as the Senate’s tax-writing committee began wading through the measure, working toward the first major revamp of the tax system in some 30 years.

Barging into the carefully calibrated work that House and Senate Republicans have done, President Donald Trump called for a steeper tax cut for wealthy Americans and pressed GOP leaders to add a contentious health care change to the already complex mix.

Trump’s latest tweet injected a dose of uncertainty into the process as the Republicans try to deliver on his top legislative priority. He commended GOP leaders for getting the tax legislation closer to passage in recent weeks and then said, “Cut top rate to 35% w/all of the rest going to middle income cuts?”

That puts him at odds with the House legislation that leaves the top rate at 39.6 percent and the Senate bill as written, with the top rate at 38.5 percent.

Trump also said, “Now how about ending the unfair & highly unpopular individual mandate in (Obama)care and reducing taxes even further?”

Overall, the legislation would deeply cut corporate taxes, double the standard deduction used by most Americans, and limit or repeal completely the federal deduction for state and local property, income and sales taxes. It carries high political stakes for Trump and Republican leaders in Congress, who view passage of tax cuts as critical to the GOP preserving its majorities at the polls next year.

With few votes to spare, Republican leaders hope to finalize a tax overhaul by Christmas and send the legislation to Trump for his signature.

The key House leader on the effort, Rep. Kevin Brady, said he’s “very confident” that Republicans “do and will have the votes to pass” the measure this week.

Brady, chairman of the House Ways and Means Committee, said he doesn’t expect major changes to the bill as it moves to a final vote in the House. Still, he said Trump’s call for removing the requirement to have health insurance as part of the tax agreement “remains under consideration.”

Trump and the Republicans have promoted the legislation as a boon to the middle class, bringing tax relief to people with moderate incomes and boosting the economy to create new jobs.

“This bill is not a massive tax cut for the wealthy. … This is not a big giveaway to corporations,” Sen. Orrin Hatch, R-Utah, chairman of the Senate Finance Committee, insisted as the panel had its first day of debate on the Senate measure.

Hatch also downplayed the analysis by congressional tax experts showing a tax increase for several million U.S. households under the Senate proposal. Hatch said “a relatively small minority of taxpayers could see a slight increase in their taxes.”

The committee’s senior Democrat, Sen. Ron Wyden of Oregon, said the legislation has become “a massive handout to multinational corporations and a bonanza for tax cheats and powerful political donors.”

The analysis found that the Senate measure would actually increase taxes in 2019 for 13.8 million households earning less than $200,000 a year. That group, about 10 percent of all U.S. taxpayers, would face tax increases of $100 to $500 in 2019. There also would be increases greater than $500 for a number of taxpayers, especially those with incomes between $75,000 and $200,000. By 2025, 21.4 million households would have steeper tax bills.

The analysts previously found a similar magnitude of tax increases under the House bill.

Neither bill includes a repeal of the so-called individual mandate of Barack Obama’s Affordable Care Act, the requirement that Americans get health insurance or face a penalty. Several top Republicans have warned that including the provision, as Trump wants, would draw opposition and make passage tougher.

A key moderate Republican in the Senate said it’s too early to say whether including repeal of the insurance mandate would cost her vote on the tax bill. “I’m going to see what the Finance Committee winds up with and what we do on the (Senate) floor,” said Sen. Susan Collins of Maine.

Collins did say she opposed Trump’s idea of reducing the top tax rate for the wealthiest earners.

Among the biggest differences in the two bills that have emerged: the House bill allows homeowners to deduct up to $10,000 in property taxes while the Senate proposal unveiled by GOP leaders last week eliminates the entire deduction. Both versions would eliminate deductions for state and local income taxes and sales taxes.

Senate Majority Leader Mitch McConnell, R-Ky., asked whether the Senate’s proposed repeal of the property tax deduction could bring higher taxes for some middle-class Americans, acknowledged there would be some taxpayers who end up with higher tax bills.

“Any way you cut it, there is a possibility that some taxpayers would get a higher rate,” McConnell told reporters after a forum in Louisville, Kentucky, with local business owners and employees. “You can’t craft any tax bill that guarantees that every single taxpayer in America gets a tax break. What I’m telling you is the overall majority of taxpayers in every bracket would get relief.”

Associated Press writer Bruce Schreiner in Louisville and Kevin Freking in Washington contributed to this report

WASHINGTON – Senate Republican leaders said Tuesday that they would seek a repeal of the Affordable Care Act’s individual mandate through their tax bill, a major change of strategy as they try to accomplish two of their top domestic priorities in a single piece of legislation.

Repealing the mandate, which compels most Americans to buy health insurance or pay a fine, would free up more than $300 billion in government funding over the next decade that Republicans could use to finance their proposed tax cuts, but it would result in 13 million fewer people having health insurance, according to projections from the nonpartisan Congressional Budget Office.

The CBO has also projected that repealing the individual mandate would drive up insurance premiums for many Americans by roughly 10 percent.

The injection of health policy into the tax debate introduces a volatile variable into what was already a challenging political enterprise for Republicans. And it’s unclear whether it will help or hurt the bill’s chances.

By freeing up hundreds of billions of dollars, Senate leaders have more flexibility as they attempt to assuage the concerns of anxious members from across their caucus.

Senate GOP leadership has come under pressure to boost the tax plan’s benefits for the middle class as nonpartisan projections have shown that the wealthy and big corporations would benefit most. At the same time, leaders are struggling to ensure that the legislation does not add too much to the budget deficit in the long run, threatening the bill’s viability under the procedures they intend to use to pass it.

“We’re optimistic that inserting the individual mandate repeal would be helpful,” Senate Majority Leader Mitch McConnell, R-Ky., said Tuesday after meeting with party members during a closed-door lunch.

Eliminating the individual mandate and having far fewer people signed up for insurance saves money because many of those people receive federal subsidies to buy coverage.

But the elimination would cause substantial political problems of its own.

The attack on former president Barack Obama’s signature legislative achievement is likely to rule out the already slim possibility of support from Democrats, and the prospect of adding millions to the ranks of the uninsured could trouble moderate Republicans who voted down previous repeal efforts.

Sen. Susan Collins, R-Maine, one of the Republicans who opposed earlier attempts to roll back the health-care law, said Tuesday that including the repeal measure “complicates” the tax effort. But she suggested she might be able to support it if the Senate also passes a bipartisan bill to preserve other aspects of the Affordable Care Act.”

Sen. John McCain, R-Ariz., who along with Collins and Sen. Lisa Murkowski, R-Alaska, voted down an Affordable Care Act repeal effort this summer, declined to say whether he’d back a tax bill that included repeal.

“I want to look at the bill in its entirety before you start plucking out parts of it to see whether I support it or not,” he said Tuesday in the Capitol.

Republicans control 52 votes of the 100-seat Senate, so the defection of three members would imperil any changes to the bill. Republicans are trying to pass the tax-cut bill through a process known as reconciliation, which requires only 50 votes – plus a tiebreaking vote from Vice President Mike Pence – to pass the bill.

Pence praised the repeal effort Tuesday at a Wall Street Journal event in Washington, noting that President Donald Trump is a vocal supporter of the effort and saying that the mandate’s elimination would amount to a tax cut for the middle class.

Repealing the mandate would undermine the Affordable Care Act’s system for attempting to get low-income people and other individuals into private health insurance plans. The health-care law banned insurance companies from discriminating against people with preexisting health conditions. But to prevent people from waiting to buy insurance until they got sick, the law also imposed financial penalties for individuals who did not maintain coverage.

Health experts say eliminating the mandate would destabilize the individual insurance markets set up by the Affordable Care Act, as they would be full of people with high health-care costs but have far fewer of the healthy people insurance companies depend on to stay profitable. In response, insurance companies would probably massively raise premiums or pull out of the marketplaces entirely.

A powerful group of stakeholders, including the major health insurance and hospital insurance lobbies and two influential doctors’ groups, wrote a letter to leaders of both parties arguing that they should retain the individual mandate.

“There will be serious consequences if Congress simply repeals the mandate while leaving the insurance reforms in place: millions more will be uninsured or face higher premiums, challenging their ability to access the care they need,” the groups wrote.

Republicans appear to have divergent plans for how they would use the funding saved by repealing the mandate.

Senate Finance Committee Republicans met late Monday to see whether each member would agree to including the health-care language, and their support was unanimous.

They plan to use the savings to offset further tax cuts, including an even greater expansion of the child tax credit, a move Ivanka Trump and Sen. Marco Rubio, R-Fla., have called for.

The president has said the repeal should be focused on getting income tax rates down for the wealthy, with any leftover money going toward cutting taxes for the middle class.

Sen. Rand Paul, R-Ky., said Tuesday morning that he would introduce his own amendment to the tax bill that would repeal the individual mandate and use the savings to lower taxes for middle-class families.

Broadly, both the Senate bill and House bill would sharply cut the corporate tax rate and cut income tax rates for individuals, while seeking to finance those cuts by eliminating or scaling back some popular tax deductions. What the deduction rollbacks don’t cover would be financed by $1.5 trillion in deficit spending over a decade.

The House and Senate bills would lower taxes for many Americans, but nonpartisan analysts have concluded that the elimination of certain deductions would have millions pay higher taxes, particularly if they live in states such as New York, New Jersey or California.

The House and Senate must pass matching versions of the tax-cut bill for Trump to be able to sign them into law. The House bill does not include a repeal of the individual mandate.

House conservatives mounted a last-ditch effort Tuesday to include a repeal before the full chamber votes on the bill, scheduled for Thursday. Rep. Mark Walker, R-N.C., the leader of the Republican Study Committee, huddled in the office of House Speaker Paul Ryan, R-Wis., Tuesday afternoon with House Rules Committee Chairman Pete Sessions, R-Texas, whose panel will make any final changes to the bill Tuesday night before it heads to the floor.

But House GOP aides who were not authorized to speak publicly on the internal discussions said GOP leaders are loath to make such a major change to the bill at this late stage and prefer to see whether the Senate could pass a bill with the repeal provision before bringing the issue up in the House.

In the Senate, the sudden shift in the tax bill threatens to undermine a compromise health measure negotiated between Sens. Patty Murray, D-Wash., and Lamar Alexander, R-Tenn. The agreement would resume payments that help low-income Americans afford health insurance, which the Trump administration halted in October.

To win support for the updated tax bill, the Senate could take up the Alexander-Murray bill alongside it, according to Sens. John Thune, R-S.D., and Bob Corker, R-Tenn. The bills cannot be combined under the rules of reconciliation.

Senate Minority Leader Charles Schumer, D-N.Y., said including a repeal of the mandate in the tax bill would torpedo Democratic support for the Murray-Alexander compromise.

“We don’t need to trade it for a tax bill, and we won’t,” he said.

And Murray, D-Wash., the top Democrat on the Senate Health, Education, Labor and Pensions Committee, told reporters she was stunned that Republicans would again seek to undo the Affordable Care Act.

“The elections last week clearly showed that the American people are paying attention, and they don’t want their health care taken away,” Murray said, referencing a string of state-level elections in Virginia, New Jersey and elsewhere in which Democrats trounced Republicans. “I don’t think [Republicans are] listening.”

The Washington Post’s Carolyn Y. Johnson, Jenna Johnson and Ed O’Keefe contributed to this report.

WASHINGTON — Wisconsin’s Ron Johnson on Wednesday became the first Republican senator to say he opposes his party’s tax bill, signaling potential problems for GOP leaders. Passage of a similar package seemed certain Thursday in the House, where a handful of dissidents conceded they expected to be steamrolled by a GOP frantic to claim its first major legislative victory of the year.

Eager to act before opposition groups could sow doubts among the rank-and-file, Republican leaders were anxious to hand Donald Trump the first crowning bill of his presidency by Christmas. Trump planned to visit House GOP lawmakers Thursday at the Capitol in what seemed likely to be a pep rally, not a rescue mission.

“Big vote tomorrow in the House. Tax cuts are getting close!” Trump enthused in a tweet Wednesday. “Why are Democrats fighting massive tax cuts for the middle class and business (jobs)? The reason: Obstruction and Delay!”

The two chambers’ plans would slash the 35 percent corporate tax rate to 20 percent, trim personal income tax rates and diminish some deductions and credits — while adding nearly $1.5 trillion to the coming decade’s federal deficits. Republicans promised tax breaks for millions of families and companies left with more money to produce more jobs.

“It represents a bold path forward that will allow us as a nation to break out of the slow-growth status quo once and for all,” said House Ways and Means Committee Chairman Kevin Brady, R-Texas, as his chamber debated the bill.

Democrats said the measures would bestow the bulk of their benefits on higher earners and corporations. In the Senate Finance Committee, they focused their attacks on two provisions designed by Republicans to save money.

One would repeal President Barack Obama’s health law requirement that people buy coverage or pay a fine, a move the nonpartisan Congressional Budget Office projects would result in 13 million more uninsured people by 2027. The other would end the personal income tax cuts in 2026 while keeping the corporate reductions permanent.

“We should be working together to find ways to cut taxes for hardworking middle-class families, not taking health care away from millions of people just to give huge tax cuts to the largest corporations,” said Sen. Bill Nelson, D-Fla.

The Republican-led Finance panel was on track to approve its proposal by week’s end. It shut down Democrats’ initial efforts Wednesday to modify the Senate bill, voting along party lines against amendments aimed at protecting health care coverage for veterans or people with disabilities, mental illness or opioid addition if the insurance mandate is ended.

But with GOP leaders hoping for full Senate passage early next month, concerns by Johnson and perhaps others would have to be addressed.

Republicans controlling the Senate 52-48 can approve the legislation with just 50 votes, plus tie-breaking support from Vice President Mike Pence. With solid Democratic opposition likely, they can lose just two GOP votes.

Besides Johnson, Republican Sens. Susan Collins of Maine, Jeff Flake of Arizona and Bob Corker of Tennessee have yet to commit to backing the tax measure.

Johnson complained the bills were more generous to publicly traded corporations than to so-called pass-through entities. Those are millions of partnerships and specially organized corporations whose owners pay levies using individual, not corporate, tax rates. While details of the House and Senate bills differ, many pass-through owners would owe more than 20 percent in taxes for much of their income.

“These businesses truly are the engines of innovation and job creation throughout our economy, and they should not be left behind,” Johnson said. But he left the door open to changes “so I can support the final version.”

A small group of House Republicans largely from New York and New Jersey was rebelling because the House plan would erase tax deductions for state and local income and sales taxes and limit property tax deductions to $10,000.

Their numbers seemed insufficient to derail the bill. Asked if they could stop it, Rep. Peter King, R-N.Y., shook his head and said, “I don’t think so.”

Repealing the “Obamacare” individual mandate would save $338 billion over the coming decade because fewer people would be pressured into getting government-paid coverage like Medicaid. Senate Finance Committee Chairman Orrin Hatch, R-Utah, used the savings to make his bill’s personal tax reductions modestly more generous.

Ending the bill’s personal income tax cuts in 2026, derided by Democrats as a gimmick, was designed to pare the bill’s long-term costs. Legislation cannot boost budget deficits after 10 years if it is to qualify for Senate procedures barring bill-killing filibusters. Those delays take 60 votes to block, numbers Republicans lack.

“To pay for these handouts to multinational corporations, millions of Americans are going to lose their health care,” said Sen. Ron Wyden of Oregon, top Democrat on the Finance panel.

Hatch said voiding the individual mandate “means we have a chance to provide greater tax relief to middle-class families, through both reduced penalties and lower overall rates.”

The House measure would collapse today’s seven personal income tax rates into four: 12, 25, 35 and 39.6 percent. The Senate would have seven rates: 10, 12, 23, 24, 32, 35 and 38.5 percent.

Both bills would nearly double the standard deduction to around $12,000 for individuals and about $24,000 for married couples and dramatically boost the current $1,000 per child tax credit.

Each plan would erase the current $4,050 personal exemption and annul or reduce other tax breaks. The House would limit interest deductions to $500,000 in the value of future home mortgages, down from today’s $1 million, while the Senate would end deductions for moving expenses and tax preparation expenses.

Each measure would repeal the alternative minimum tax paid by higher-earning people. The House measure would reduce and ultimately repeal the tax paid on the largest inheritances, while the Senate would limit that levy to fewer estates.

Associated Press writers Kevin Freking, Richard Lardner and Matthew Daly contributed to this report.

WASHINGTON — Among the Republicans in Colorado’s congressional delegation, U.S. Rep. Ken Buck is the one most likely to oppose a far-reaching tax plan that’s scheduled for a vote Thursday in the U.S. House.

The two-term lawmaker from Windsor was one of just 20 Republicans to oppose a related budget bill that passed the House last month, and Buck said he might vote against the tax measure for a similar reason — its impact on the national debt and deficit.

“The problem I have with this tax reform is (that) America needs to reduce spending when it reduces revenue,” said Buck, who remained on the fence late Wednesday afternoon. “We can’t increase spending at the same time we reduce revenue or we blow a hole in the budget.”

Scorekeepers at the Joint Committee on Taxation, a nonpartisan congressional panel, have estimated the Republican-authored tax bill would add more than $1.4 trillion to the deficit over the next 10 years.

That’s due to a slate of tax cuts prescribed by the bill — from a decrease in the corporate tax rate to the eventual elimination of levies on large inheritances.

Supporters of the bill, including Republican U.S. Rep. Doug Lamborn of Colorado Springs, have argued the projected loss in revenue eventually would be offset by economic gains spurred by the tax cuts.

“Adding to the deficit is always a concern. I don’t like doing that,” Lamborn said. But “with higher growth in the economy, at some point in time — I don’t know how quickly — the growth that wouldn’t have otherwise happened will more than make up for the lost tax revenues.”

Economists are less sure. Several preliminary forecasts of the House bill have estimated that the revenues would not be fully recouped by future economic growth.

One of those, done by the Tax Foundation, a Washington-based think tank, expected the federal government still would lose about $1 trillion in revenue over the next decade even after potential economic gains were taken into account.

Buck said a loss in future revenue is even more worrisome when juxtaposed with Congress’ intent to increase defense spending and its obligation to cover the rising cost of programs such as Social Security or Medicare.

“With all of those things, we are going to reduce revenue,” said Buck of the tax plan. “It makes absolutely no sense, and it’s irresponsible. So that’s what I’m struggling with.”

Buck added that he supported the general idea of tax reform, including a reduction in corporate taxes and a simplification of the tax code.

If Buck ultimately decides to oppose the bill, he’ll almost certainly be joined by Colorado’s three House Democrats: U.S. Reps. Diana DeGette, Ed Perlmutter and Jared Polis.

Perlmutter called it a “terrible bill” and said it was evidence that Republicans only “talk a big game” about fiscal responsibility.

“They have no qualms about exploding the debt,” Perlmutter said.

Despite the opposition, House Republican leaders have been bullish this week about the bill’s passage.

Lamborn said he was a “solid yes” and Colorado’s two remaining House Republicans, Mike Coffman and Scott Tipton, were upbeat about the bill ahead of Thursday’s vote.

If the House approves the bill, the next step would be passage in the Senate.

Majority Leader Mitch McConnell has targeted a vote for some time after Thanksgiving but the Senate plan faces its own set of hurdles, notably the recent inclusion of a controversial provision – not included in the House plan – that would undo a plank of the Affordable Care Act by nixing a fine on taxpayers who don’t buy health insurance.

WASHINGTON — Last-minute conversations with President Donald Trump and House Speaker Paul Ryan helped persuade U.S. Rep. Ken Buck to vote with most of his Republican colleagues in support of a broad tax bill, the Colorado lawmaker said Thursday after the 227-205 vote.

Buck initially was skeptical of the measure — given expectations that it would grow the national deficit — but the Windsor Republican said he was convinced to get behind it after he got assurances the tax cuts would be partially offset by future reductions to spending on social programs.

“After talking to the president and meeting with the speaker, I’m comfortable that we will take up welfare reform in early 2018,” Buck said. He defined welfare reform as changes such as “job training and limiting the number of weeks someone can get unemployment.”

Buck was the only question mark among Colorado’s U.S. House delegation leading up to the vote. As expected the rest were split along party lines, with Republicans in support and Democrats in opposition.

WASHINGTON – President Donald Trump and GOP House Speaker Paul Ryan, Wis., won a major victory as the House passed the tax bill Thursday, the central piece of the Republican plan to boost the U.S. economy. No Democrats voted for the bill. Ryan could lose 22 GOP votes, but in the end, he only lost 13.

The legislation would affect every American household and business owner. The bill was first introduced Nov. 2 and was voted on just two weeks later, leaving little time for analysis or debate on the 440-page legislation. The next step is for the Senate to pass its version and then for both chambers to reconcile their substantial differences.

The main goal of the House’s “Tax Cut and Jobs Act” is to lower taxes on companies in an effort to make them more competitive and discourage them from moving abroad. The bill reduces the corporate tax rate from 35 percent to 20 percent and the rate for pass-through businesses down to 25 percent (with some restrictions). Many families would also pay less, although Ryan has admitted that won’t be the case for everyone. Here’s a rundown of what is actually in the final version of the bill that passed.

It keeps the Affordable Care Act’s individual mandate. The House voted on a tax bill only. The Senate bill includes a provision to scrap the legal requirement that almost all Americans buy health insurance or pay a penalty. The House isn’t touching that, which may lead to a showdown between the two chambers if they have to resolve their very different versions of the bill.

Big businesses win. The House bill cuts the top rate that large corporations pay from 35 percent to 20 percent, the biggest one-time drop in the big-business tax rate ever. It is a permanent change that does not expire. On top of that, companies would get some new tax breaks to help lower their bills, such as the ability to deduct all the costs of purchasing new equipment for five years, as well as a special low rate on any money they bring back to the United States from low-tax countries such as Ireland. Many businesses have been holding cash overseas to avoid 35 percent U.S. taxes. Now they would get to bring the money home at a tax rate of 12 percent.The entire business tax system would also change from a worldwide system, in which money anywhere around the globe is taxed, to a territorial system in which it’s mostly money made in the United States that is taxed. Businesses have long lobbied for this change.

Small businesses get a mini-win. The National Federation of Independent Businesses, the largest small business lobby, initially was against the House bill, but Republicans made some changes and now the NFIB is giving its blessing. 95 percent of American businesses are organized as pass through companies (LLCs, S-Corps, partnerships), and they “pass through” the business income to the owner’s individual tax rate. The House plan lowers the top rate from 39.6 percent to 25 percent for small businesses (excluding “service companies” like consultants and lawyers) and requires a complex formula where the 25 percent rate only applies to about 30 percent of the business income. But the reality is most small businesses – 85 percent – already pay taxes at rates of 25 percent or less. To help out the small “mom and pops,” the final bill has a 9 percent rate on the first $75,000 in income for business owners making $150,000 or less. But that tax break phases in, meaning it isn’t fully available until 2022.

The rich do very well. The wealthy get a lot of benefits in the bill. The estate tax, which is paid only when property and other assets worth over $5.5 million are passed on to heirs, doubles to about $11 million in 2018 (around $22 million for couples), meaning a lot fewer people have to pay it. And the estate tax goes away entirely in 2024. The mega-wealthy also would get to keep charitable deductions, a popular way that lowers their tax bills, and they no longer would have to pay the alternative minimum tax (AMT), a safeguard against excessive tax dodging that’s been in place since 1969. Some wealthy business owners would be able to take advantage of the lower pass-through rate as well. Overall, the Tax Policy Center found that half the benefits of the bill go to the top 1 percent by 2027.

Donald Trump would probably benefit a lot. As The Washington Post explains, many parts of the bill help Trump. One of the interesting ones is that the lower 25 percent pass-through rate would apply to all income for passive real estate investors like Trump, a much better deal than most active pass-through business owners get.

Most Americans pay the same – or lower – taxes until 2023. For the next five years, the vast majority of Americans (92 percent) would either pay less or see little change, according to the official estimates from the Joint Committee on Taxation. But that shifts sharply after five years. In 2023, only 40 percent of Americans would pay less. Twenty-two percent would pay more (the rest see little change), JCT found.

By 2023, a key middle-class tax break expires. Many of the people facing tax hikes are solidly middle class ($40,000 to $75,000) or else in the “upper upper” middle class ($200,000 to $400,000), JCT found. A key savings for the middle class – the Family Flexibility Credit – goes away after 2022. The House bill also uses a low measure of inflation after 2022, meaning more and more people start to jump from the 12 percent tax bracket to the 25 percent bracket (which starts to kick in at $67,500 for heads of households). Higher income earners are impacted by the elimination of numerous itemized deductions (see more explanation on those below).

Taxes will get simpler for many. The House bill collapses the seven tax brackets the country has down to just four (12 percent, 25 percent, 35 percent and 39.6 percent). The top rate becomes a “millionaire rate” applying to income of $1 million or more a year for couples (and of $500,000 or more for individuals).

In an effort to simplify, the House bill also does away with many of the credits and deductions and replaces them with a larger standard deduction, a slightly larger child tax credit ($1,600 per kid versus $1,000 now) and a new Family Flexibility Credit worth $300 a year for individuals and $600 for couples. The larger standard deduction means the first $12,000 for individuals and $24,000 for couples is tax-free.

Say goodbye to most deductions. Almost all itemized deductions are going away, except for three. The final House bill keeps the deductions for charitable donations, property taxes up to $10,000 a year and the mortgage interest deduction. The mortgage interest deduction would be capped at $500,000 for mortgages (down from $1 million now).

About 30 percent of filers itemize. Most of the people who itemize claim the state and local tax deduction (SALT) where they deduct their state and local sales, income and property taxes. Under the House bill, only the property deduction would remain. This hurts people living in high-tax (and often blue) states like New Jersey, New York and California. Several GOP representatives from these states plan to vote no on the bill in protest.

– The adoption credit stays. The 401(k) exemption stays. But . . .

– Say goodbye to the tax credits for plug-in motor vehicles. It gets repealed in 2018.

– Say goodbye to the deduction for medical expenses. It goes away in 2018.

– Say goodbye to being able to write off the costs of your tax preparer. That goes away in 2018.

– Say goodbye to the deduction for moving expenses. It goes away in 2018, except for members of the military.

– Say goodbye to most tax benefits for college. At the moment, low and middle income Americans can deduct up to $2,500 a year in student loan interest. That benefit would go away in 2018. In addition, grad students who get tuition waivers because they teach or do research would now have to pay income tax on the waiver, a big change. For students currently in school, the American Opportunity Tax Credit would remain, which allows a $2,000 credit for higher education expenses.

– Say goodbye to the deduction for theft or loss of valuables. Right now people can write a lot of their losses off on their taxes, but that would be gone in 2018. The one exemption is losses for a natural disaster such as Hurricane Harvey. Those would stay.

How much does the bill cost (and who pays)? The price tag for the bill is just over $1.4 trillion, according to JCT, meaning that amount would be added to the debt if spending cuts are not made (or more revenue raised) in the coming years to offset the cost. Economists believe the tax cuts would generate some additional growth, but not nearly enough to cover the costs.

It total, about three-quarters of the benefits go to businesses and the remaining quarter goes to individuals.

By Steven Pressman, Colorado State University

Many children have played hot potato, a game in which they pass a spud to other children quickly so they don’t get stuck with it when the music stops.

Taxes are like that potato. No one likes paying them; everyone tries to pass them to others. The game of hot potato sheds some light on the debate over Republican tax cutting plans, particularly when it comes to companies.

The House just passed its tax cut bill. It would give about two-thirds of roughly $1.5 trillion in net tax cuts over the next decade to businesses, mainly by lowering the corporate income tax rate to 20 percent from 35 percent. That puts a lot of money on the table. About $100 billion in U.S. corporate profits would be retained by companies rather than paid to the government each year.

Treasury Secretary Steve Mnuchin has claimed that most of this tax savings would go to workers, in the form of higher wages, in line with the president’s argument that the plan would benefit the middle class.

With the help of hot potatoes, let me explain why he’s wrong.

Why workers won’t gain

There are two ways a corporate income tax cut can trickle down to workers’ pockets: directly through higher wages or indirectly via lower prices at stores selling the things they buy.

Mnuchin contends that workers currently bear 70 percent of the corporate tax burden – or get stuck with 70 percent of the corporate tax hot potato. So, a tax cut would mean that companies pass much of their tax benefits to their employees by paying them more or by cutting prices and increasing the buying power of current workers.

Yet, based on past tax cuts, economists have estimated that only 20 percent of the corporate income tax is borne by workers, suggesting that they would get just a small fraction of any corporate tax reduction.

Furthermore, when asked how they’d spend the gains from a tax holiday on the $2.5 trillion that they currently have parked overseas – which is also part of the corporate tax cut plan – most companies indicated they’d pay back debt, repurchase shares or invest in mergers and acquisitions. Wage hikes were not high on the corporate agenda.

Nor have they been part of the corporate agenda for the past several decades. Since the 1970s worker productivity has increased 74 percent, while average wages have risen only 12 percent. There is no reason to believe that tax cuts would all of a sudden generate greater corporate generosity for workers.

As for lower prices, if the U.S. economy were dominated by small businesses, intense competition would force these companies to lower prices rather than give it to shareholders in the form of dividends. Reduced prices for goods would translate into improved living standards for workers the same way that a wage hike would.

But our economy today is dominated by large multinational corporations facing little pressure to reduce prices. So, the gains from a corporate tax cut will remain with the owners of the business – shareholders.

Furthermore, corporate CEOs have large incentives to avoid passing the gains from a tax cut to workers: Executive pay is tied to the company’s share price. If they pass the extra money on to shareholders in the form of dividends or stock buybacks, share prices will rise – as will executive pay packages.

VIDEO: CEOs asked if they plan to increase their company’s capital investments if the GOP’s tax bill passes.
A few hands go up.
“Why aren’t the other hands up?” Gary Cohn asks.#WSJCEOCouncil pic.twitter.com/TD2oAlN27S

— Natalie Andrews (@nataliewsj) November 14, 2017

Paying for tax cuts

So back to our game. When there’s a tax cut, someone still is stuck with a potato. That is, someone has to pay for it. There are two ways this can be done: increased borrowing or lower government spending.

When economies are near full employment, as the U.S. is today, additional government borrowing will increase borrowing costs or interest rates. So if the U.S. were to borrow more money to finance the tax cuts, the losers would be middle-income households borrowing to start a business, go to college or buy a home. Around 80 percent of Americans are currently in debt, with a median debt of $70,000. Homeowners would be big losers because higher mortgage rates would also lower the value of their home (they’d also get hammered by changes to the tax code that would make the mortgage interest deduction useless for most people).

Whether or not the U.S. borrows more and increases the national debt, some spending cuts would also be required.

These would likely come from Social Security, Medicare and other social programs that benefit average citizens and the poor. That’s because lawmakers won’t find much savings anywhere else, apart from the military budget, which they almost certainly wouldn’t touch.

Already this appears to be in the cards. The Congressional Budget Office warned that if the Republican tax plan adds to the deficit, it could set off a 2010 budget rule that would lead to half a trillion in automatic cuts to Medicare over the next decade. And the Senate tax plan calls for repealing the requirement in the ACA that everyone buy insurance, which would lead to 13 million Americans losing health insurance – all to save $338 billion over 10 years.

The big winners

The consequence of the $1.5 trillion tax cut then would be continuing stagnant wages, cuts in government programs, higher interest rates and rising inequality. Translation: The rich get richer and average Americans get stuck holding some very big potatoes.

Adding further injury, average workers wouldn’t benefit very much from the proposed individual income tax cuts either. Only 8.3 percent of those in the House plan would go to taxpayers making $50,000 or less (which about half of all taxpayers). In contrast, millionaires, the richest 0.3 percent of the population, receive more than a fifth of the cuts.

Even worse, unlike for companies, all the tax cuts for the working class disappear after 10 years.

WASHINGTON — The ultra-wealthy, especially those with dynastic businesses — like President Donald Trump and his family — do very well under a major Republican tax bill moving in the Senate, as they do under legislation passed this week by the House.

Want to toast the anticipated tax win with champagne or a beer — or maybe you’re feeling Shakespearean and prefer to quaff mead from a pewter mug? That would cheer producers of beer, wine, liquor — and mead, the ancient beverage fermented from honey. Tax rates on their sales would be reduced under the Senate bill.

On the other hand, people living in high-tax states, who deduct their local property, income and sales taxes from what they owe Uncle Sam, could lose out from the complete or partial repeal of the deductions. And an estimated 13 million Americans could lose health insurance coverage over 10 years under the Senate bill.

Some winners and losers:

WINNERS

— Wealthy individuals and their heirs win big. The hottest class-warfare debate around the tax overhaul legislation involves the inheritance tax on multimillion-dollar estates. Democrats wave the legislation’s targeting of the tax as a red flag in the face of Republicans, as proof that they’re out to benefit wealthy donors. The House bill initially doubles the limits — to $11 million for individuals and $22 million for couples — on how much money in the estate can be exempted from the inheritance tax, then repeals it entirely after 2023. The Senate version also doubles the limits but doesn’t repeal the tax.

Then there’s the alternative minimum tax, a levy aimed at ensuring that higher-earning people pay at least some tax. It disappears in both bills.

And the House measure cuts tax rates for many of the millions of “pass-through” businesses big and small — including partnerships and specially organized corporations — whose profits are taxed at the owners’ personal income rate. That’s potential cha-ching for Trump’s far-flung property empire and the holdings of his daughter Ivanka and her husband, Jared Kushner. The Senate bill lets pass-through owners deduct some of the earnings and then pay at their personal income rate on the remainder.

— Corporations win all around, with a tax rate slashed from 35 percent to 20 percent in both bills — though they’d have to wait a year for it under the Senate measure. Trump and the administration view it as an untouchable centerpiece of the legislation.

— U.S. oil companies with foreign operations would pay reduced taxes under the Senate bill on their income from sales of oil and natural gas abroad.

— Beer, wine and liquor producers would reap tax reductions under the Senate measure.

— Companies that provide management services like maintenance for aircraft get an updated win. The Senate bill clarifies that under current law, the management companies would be exempt from paying taxes on payments they receive from owners of private jets as well as from commercial airlines. That was a request from Ohio Sens. Rob Portman, a Republican, and Sherrod Brown, a Democrat, whose state is home to NetJets, a big aircraft management company.

Portman voted for the overall bill. Brown opposed it.

LOSERS

— An estimated 13 million Americans could lose health insurance coverage under the Senate bill, which would repeal the “Obamacare” requirement that everyone in the U.S. have health insurance. The projection comes from the nonpartisan Congressional Budget Office. Eliminating the fines is expected to mean fewer people would obtain federally subsidized health policies.

— People living in high-tax states would be hit by repeal of federal deductions for state and local taxes under the Senate bill, and partial repeal under the House measure. That result of a compromise allows the deduction for up to $10,000 in property taxes.

— Many families making less than $30,000 a year would face tax increases starting in 2021 under the Senate bill, according to Congress’ nonpartisan Joint Committee on Taxation. By 2027, families earning less than $75,000 would see their tax bills rise while those making more would enjoy reductions, the analysts find. The individual income-tax reductions in the Senate bill would end in 2026.

ATLANTA — A popular deduction targeted in the GOP’s overhaul of the tax code is used by more than a quarter of all filers in a majority of states, including many led by Republicans where some residents eventually could see their federal tax bills rise.

The exact effect in every state isn’t known, in part because of differences in the Senate and House versions of the bill. But the change to the deduction for state and local taxes could alter the bottom lines for millions of taxpayers who itemize.

Residents in high-tax, Democratic-led states appear to be the hardest hit. But some filers also could be left paying more in traditional Republican states, such as Georgia and Utah where about a third of taxpayers claim the deduction.

“It’s a bad deal for middle class families and for most Georgians,” said Georgia state Rep. Bob Trammell, leader of the House Democrats.

He said Republicans are eliminating the state and local deduction to help pay for tax cuts for businesses and the wealthy.

How many winners and losers are in each state depends in large part on another aspect of the Republican tax overhaul that would nearly double the standard deduction — to about $12,000 for individuals and about $24,000 for married couples.

Republicans say that provision would be a net benefit for most tax filers.

The Tax Policy Center, run by the Urban Institute and Brookings Institution, has estimated that the number of people itemizing deductions would drop by three-quarters. Some of those taxpayers could get a larger deduction under the Republican plan, even though they no longer could claim a break for state and local taxes.

“Based on what I have seen, it might actually help some Georgians” to replace the state-and-local tax break with a higher standard deduction, said Georgia state Rep. Terry England, the Republican chairman of the House Appropriations Committee.

Yet estimates by the Tax Policy Center and a nonpartisan congressional analysis say some taxpayers eventually will end up owing more in federal taxes under the GOP plans.

The left-leaning Institute on Taxation and Economic Policy said changes to the state and local tax deduction under the House bill would contribute to one of every five taxpayers in the hardest hit states getting a higher tax bill. While most of those states are led by Democrats, Republican-led Georgia and Utah, and the swing state of Virginia were among them.

Democratic lawmakers said that any initial tax relief felt by the middle class or working-class families will eventually disappear. In Georgia, for example, an estimated 9 percent of filers would pay higher taxes in 2018, rising to 22 percent by 2027, according to an analysis by the Institute on Taxation and Economic Policy.

The state and local tax deduction is just one of many provisions targeted for change under legislation that passed the House earlier in the week and is pending in the Senate. The House version would repeal the deduction for income and sales taxes while capping the property tax deduction at $10,000. The Senate bill would end deductions for all state and local taxes.

Most tax filers currently take the standard federal deduction of $6,300 per individual or $12,600 for married couples. But some reap larger tax breaks by itemizing deductions for state and local taxes, medical expenses, charitable contributions and interest paid on home mortgages.

The state and local tax break is the largest of those. About 44 million taxpayers claimed deductions totaling around $550 billion for state and local taxes paid in 2015, according to the most recent IRS data.

The top 10 states with the highest average state and local tax deductions all voted for Democrat Hillary Clinton in last year’s election. New York led the way with an average state and local tax deduction of more than $22,000, followed by Connecticut, California, New Jersey and Massachusetts.

But when analyzed by the percentage of taxpayers claiming the deduction, several states won by Trump rank in the top third nationally. In reliably Republican Utah, 35 percent of taxpayers claimed the deduction for state and local taxes. That figure was 33 percent in Georgia and 31 percent in Wisconsin. Thirty-five states had at least one-quarter of their taxpayers claim the deduction.

Because of its widespread effect, debate over curtailing the deduction already is creeping into competitive 2018 elections.

Democratic U.S. Sen. Tammy Baldwin of Wisconsin has warned that repealing the deduction could lead to a tax increase for many state residents.

The left-leaning Wisconsin Budget Project has estimated that the Senate plan overall eventually would leave nearly 300,000 Wisconsin taxpayers with higher federal income taxes. Baldwin said the plan will disproportionally benefit corporations and the wealthiest.

“That’s not right and it’s not fair,” she said during a news conference Friday in Milwaukee.

One of her Republican challengers, state Sen. Leah Vukmir, has signed a letter encouraging the tax repeal. Republican Gov. Scott Walker, a tax overhaul supporter who is seeking re-election, has been criticized by the liberal advocacy group One Wisconsin Now. The group says repealing the deduction would have “the net effect of a massive property tax increase for Wisconsin homeowners.”

Utah state Sen. Howard Stephenson is a strong supporter of repealing the state and local tax deduction, even though a comparatively high percentage of residents there claim it.

Stephenson, a Republican who is president of the Utah Taxpayers Association, said he believes the deduction generally favors high-tax states to the detriment of states with a lower tax burden, such as his own.

“We don’t like paying for the excesses in other states,” he said.

Associated Press writer Scott Bauer in Madison, Wisconsin, contributed to this report.

HOLLIS, N.H. – For decades, the battle lines in New England’s most politically conservative state were clear. Republicans ran on tax cuts. Democrats ran on targeted tax credits. Both parties kept New Hampshire free of a state income or sales tax, blurring some distinctions for suburban voters.

Then came the Republican tax plan in Congress.

“Do you think it’s right to raise taxes on millions of hard-working Americans?” asked Sen. Maggie Hassan, D-N.H., at a Friday night Democratic fundraiser. “Do you want to risk a $25 billion yearly cut to Medicare to give the wealthiest few a tax cut?”

The crowd of about 600 Democrats bellowed “no,” still shocked by the party’s recent political gains. Coming off Election Day wins from Seattle to Long Island, Democrats are starting to see the shape of a new majority, built on a potential suburban backlash to changes in the tax code.

“It’s incredible,” said Rep. Ted Lieu, D-Calif., a vice chair of the Democratic Congressional Campaign Committee who has helped the party recruit candidates in suburban West Coast districts. “I don’t understand why they think raising taxes on the middle class to benefit the rich would be better for them electorally than doing nothing at all.”

Republicans have accused the minority party of demagoguery and bad math. In New Hampshire, Republican Gov. Chris Sununu has praised the tax plan for doubling the standard deduction and adding a property-tax exemption. Democrats have falsely claimed that the bill would raise taxes on “most working-class families” – only 6.5 percent of lower-income households will take a direct hit, though many taxpayers making less than $100,000 would get little.

Yet Democratic wins, and polling about the tax bill, has led the party to think that it can cleave millions of voters from the GOP.

In a column for conservative news website Newsmax this week, pollsters John and Jim McLaughlin wrote that voters generally approved of “President Trump’s plan to cut taxes,” but opposed the elimination of state and local deductions – an idea that was “driving disapproval” for whatever Republicans proposed.

“We have polled for 21 currently sitting House Republican members,” the McLaughlins wrote. “Many of these members are in hard-fought battleground districts which would see a tax increase if the state and local deduction was eliminated. We helped them get elected and want to make their re-election easier, not harder.”

Thursday’s tax vote in the House revealed who some of those members were, many from California, New Jersey, and New York. In statements, they echoed Democrats in predicting that the bill would hurt the middle class.

“When my constituents who are very good with their numbers tell me that they are going to be (paying) $5,000 to $10,000 more in taxes, I’m supposed to represent their interests,” said Rep. Dana Rohrabacher, R-Calif., who represents a prosperous stretch of the Southern California coastline.

Thirteen Republicans opposed the bill – enough for easy passage, but a sea change in tax-cut politics. The 2001 Bush tax cuts, the closet comparison to the current bill, won unanimous support from House Republicans and 13 votes from Democrats. No Democrat voted for the Republicans’ tax bill last week.

Rep. Debbie Dingell, D-Mich., who had warned in 2016 that Hillary Clinton would lose Michigan, said that the tax bill would reverse Republicans’ gains. She compared the vote to Democrats’ 1993 passage of a tax hike package, which Republicans unanimously opposed while chanting “bye-bye” to Marjorie Margolies, a suburban Philadelphia Democrat who cast the bill’s deciding vote.

“The Republicans are going to pay a real price,” Dingell said. “Margie voted for that knowing she was going to lose. I don’t think they know they’re going to lose. I don’t think they realize this is going to cost them those seats in the suburbs.”

Democrats like Dingell paid close attention on Nov. 7. In even high-tax areas, such as New York’s Westchester County, Republican promises of tax relief fell flat. In New Jersey, where Gov.-elect Phil Murphy, D, won easily, his Republican opponent came out loudly against the GOP’s tax bill.

In Virginia, where the party’s bigger-than-expected wave swept out suburban Republican legislators, Republican gubernatorial nominee Ed Gillespie pitched a 10 percent “across-the-board” cut in state tax rates. But according to Geoff Garin, the pollster for Democratic Gov.-elect Ralph Northam’s campaign, the tax plan was “a flop in the suburbs,” which is why Gillespie pivoted – also ineffectively – to attacks on cultural issues.

“First, there simply were not that many suburban voters who felt aggrieved by the amount they are paying in state income taxes,” said Garin. “Second, suburban voters quickly saw Gillespie’s proposed cuts as a dangerous gimmick, and the first question they had about his plan was what programs would have to be cut to pay for it.”

In New Hampshire, Democrats saw the same Republican swoon. In 2017 special elections, Democrats won four state legislative races in Republican-held districts. Just as telling was where they did it – Republican-leaning suburbs of Manchester, and in the vacation area around Lake Winnipesaukee.

Those wins continued on Nov. 7, when Democrats took over Manchester’s city hall for the first time since George W. Bush’s presidency and made gains in large towns closer to high-tax Massachusetts. “In Nashua, sweet Nashua, we pulled off a clean sweep,” New Hampshire Democratic Party Chairman Ray Buckley said at the party’s dinner.

In an interview, Buckley said that many of the gains had come from ramped-up Democratic enthusiasm. The Manchester race had attracted 236 full-time volunteers, more than three times as many as Mayor-elect Joyce Craig’s first bid in 2015.

“There’ve been years where we’ve had to get volunteers from Massachusetts,” he said with a laugh.

The tax cut, Buckley argued, would help Democrats more than the party that actually wanted to pass it. A University of New Hampshire poll released Tuesday found the tax bill already underwater, with just 39 percent of voters in support. A majority of New Hampshire voters favored the bill’s expanded child tax credit, but just 35 percent favored its slash to corporate taxes, which Republicans have described for months as a job creator. But the talk of changes to state tax deductions overwhelmed all.

“A lot of people here work in Massachusetts and pay some of those taxes,” said Chris Pappas, a member of the state’s Executive Council who’s now running for the Manchester-based 1st Congressional District. “They’re going to get whacked if they cut the state and local tax deduction.”

Democratic confidence about fighting the tax cuts has also been bolstered experience in recent years. In 2009, the party passed a stimulus package with little Republican support, and waited for voters to appreciate its payroll tax and alternative minimum tax cuts. In a sluggish 2010 economy, Democrats were blown away, with voters largely unaware of minor changes to their taxes.

The unpopularity of 2017’s tax cuts have sent Democrats back to a playbook that Republicans used effectively in 2010 – warnings that Washington was going to pile up debt to redistribute money away from the people who needed it. At the New Hampshire dinner, Rep. Tim Ryan, D-Ohio, who just months earlier had warned his party not to rule out a tax plan, described a Republican Party that would put suburban and working-class taxpayers in hock.

“They’re gonna go to the Chinese banks, the Chinese government, borrow $2.5 trillion, and give it away to the wealthiest people in our country,” said Ryan.

Hassan hit on similar populist themes. The bill, she said, would not only cut health-care spending – the Senate’s version includes a repeal of the Affordable Care Act’s insurance mandate – but penalize small businesses.