WASHINGTON -- Senate Republicans on Thursday proposed a tax overhaul that does away with deductions for all state income and property taxes, going further than the version proposed by the House and delivering a blow to residents high-tax states, according to senators briefed on the plan.
The Senate plan also would delay a proposed new lower 20 percent corporate rate until 2019 in order to avoid adding more than $1.5 trillion to the deficit, which would violate terms of the recently passed budget, Republicans said. The House tax plan, at President Donald Trump's urging, offered an immediate corporate cut from the current 35 percent rate.
In another difference, the Senate plan proposes a slightly lower top individual tax rate than the House version, which would keep the current 39.6 percent. The Senate plan would lower the top individual rate to 38.5 percent, sources said. It would apply to individuals earning $500,000 or more and couples earning $1 million or more, according to Sen. John Hoeven of North Dakota.
The Senate plan will not include a repeal of the requirement under the Affordable Care Act that individuals have health care insurance, according to Sen. Bill Cassidy, R-La. That idea had been pushed by some as another way to save money.
Cassidy said the Senate version also will preserve deductions for medical expenses, which were eliminated in the House version.
Hoeven said the plan would similarly keep the deduction for parents who adopt children, a key demand of many evangelical groups.
Senate Republicans have been looking for new revenue sources to keep the package within the $1.5 trillion deficit limit, but their approach sets up a showdown with the House over key provisions, including the repeal of deductions for state, local and property taxes.
Republicans in the House had brokered a fragile compromise with lawmakers from New York, New Jersey and California to preserve the property tax deduction, capped at $10,000 per household, while doing away with the other state and local tax deductions.
Altering that agreement could cost Republicans votes in the House.
Because Democrats in both the House and Senate are expected to reject the bill after being shut out of the largely partisan process, Republicans must keep their slim majorities together for passage. They can lose no more than about 20 GOP votes in the House and two in the Senate, if Vice President Mike Pence is called on to break a Senate tie.