Now that the Senate has passed the $4 trillion federal budget, unlocking the reconciliation process and clearing the way for tax reform, Republicans on the House Ways and Means Committee are hashing out the finer points of tax reform. And in keeping with the spirit of Treasury Secretary Steven Mnuchin’s promise that the lopsided nature of the proposal’s cuts (which allocated 80% of the benefits to the top 1% of earners) would be corrected in committee, a group of House Republicans are considering a radical proposal that brings them into direct conflict with Mnuchin and Gary Cohn, who the group derisively refer to as “the Democrats.”
Axios reports that House Republicans are exploring not cutting the income tax rate for people who earn $1 million or more per year.
Right now, the marginal tax rate for anyone who makes $418,000 or more per year is 39.6%. The Republicans' expected opening offer, which Axios says has been secretly negotiated for months and has received the blessing of the president, would have cut the highest tax rate to 35%.
Rep. Carlos Curbelo, R-Fla., Rep. Vern Buchanan, R-Fla., and House Ways and Means Committee Chairman Kevin Brady, R-Texas
But now, some House Republicans are pushing for people who earn between $418,000 and $999,999 to be in a lower tax bracket, while those earning $1 million or more will keep paying at the 39.6% rate.
Assuming this proposal isn’t immediately killed by the GOP leadership, it would theoretically allow Republicans to kill two birds with one stone by rebutting criticisms that the bill’s tax cuts overwhelmingly favor the wealthy while also helping to minimize the increase in the deficit that has worried some deficit hawks like Senator Rand Paul.
However, the proposal’s survival is far from assured. Withholding a tax cut from million-dollar-earners would enrage much of the Republican donor class and anti-tax activists like Grover Norquist.
Asked by Axios about the proposal, Norquist said the idea isn’t the dumbest he’s ever heard, but one of the top 20 dumbest.
Norquist also argues this won't placate Democrats, who inevitably will charge that Trump's tax overhaul is just designed to help the rich, but will alienate conservatives.
If appended to the final version of the law, the measure would also enrage many of Mnuchin and Cohn’s banker friends.
However, Axios seems to think it has a shot at survival, since president Trump reportedly doesn’t really care all that much about the individual rate for high earners.
"He basically thinks they [rich people] are fine and he believes they don't care that much about the individual rate so long as they get all the other goodies, like the corporate rate and expensing," the official said.
Of course, Axios has repeatedly proven that it’s not above reporting rumors and legislative proposals that, while they may have been considered at one point, never really had much of a chance at making it into the final bill.
As far as the timeline for tax reform is concerned, the House expects to pass the Senate version of the budget this week. Shortly after, a timeline for when House Republicans will release their tax cut bill should emerge.
For what it’s worth, Mitch McConnell took to the Sunday shows this weekend to insist that Republicans would succeed in passing tax reform by year’s end. He also insisted Republicans “aren’t abandoning revenue-neutral tax reform,” before repeating the dubious claim that the federal government will be able to minimize the deficit by bolstering economic growth above 3% - well above its post-crisis average.
The report also appears to support widely held suspicions that the final bill may not bear much of a resemblance to the original nine-page plan, which was itself a departure from a one-page outline unveiled in April.