White House battles critics over tax plan as lawmakers prepare to act

By David Morgan

WASHINGTON (Reuters) - The White House struggled on Thursday to defend its new tax plan against criticism that it would help the rich at the expense of lower classes, as Republicans in Congress prepared to move ahead with actual legislation.

A day after President Donald Trump unveiled the plan and called it "a miracle for the middle class," White House economic adviser Gary Cohn said he could not guarantee that all middle-class Americans would see their tax bills decline.

"I cannot guarantee that. You could find me someone in the country that their taxes may not go down," Cohn told reporters at a White House briefing.

Cohn said that taxes may not decline for some, "maybe one person," but insisted that the middle class would benefit.

"Our tax plan is aimed at making sure that we give middle class Americans a tax cut," Cohn told reporters. "That is what we are spending all of our time on doing, and we've got lots of tools at our disposal to make sure we do that and that's what we're going to do."

The Trump plan's tax cuts for businesses and individuals would reduce federal revenues by more than $5 trillion over a decade, according to independent analysts.

The United States is already $20 trillion in debt and the Republican plan, while very specific on tax cuts, provided few details on how to offset the federal revenues that would be lost if the U.S. Congress were to approve Trump's proposals.

Some critics said the plan may need to be pared back if Congress cannot agree on $4 trillion in offsets.

It calls for slashing the corporate tax rate to 20 percent from 35 percent, the small business rate to 25 percent from 39.6 percent and the top individual rate to 35 percent from 39.6 percent. The Trump administration did not assign income levels to their proposed tax brackets.

Every year, the Internal Revenue Service adjusts tax provisions for inflation to avoid people and businesses suddenly finding themselves in a different tax bracket.

The plan also has raised concerns among some critics about how it would effect the U.S. income gap between rich and poor.

Democrats blasted the plan as a giveaway to the wealthy and businesses, despite Trump's assurances that the rich would not benefit. Critics have zeroed in on Republican plans to raise the lowest individual tax bracket to 12 percent from 10 percent.

Representative Kevin Brady, Republican chairman of the tax-writing House of Representative Ways and Means Committee, dismissed the criticism as false.

"The 10 percent bracket today goes to zero," Brady told a audience at the Heritage Foundation think tank. "Those of modest income, the poor and middle class, are better off."

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But before they can unveil actual tax reform legislation, the House and Senate will have to adopt a fiscal year 2018 budget resolution containing a procedural tool called "reconciliation," which is vital if Republicans intend to move a tax bill through the Senate without support.

Until this week, the budget resolution drive was embroiled in House Republican infighting. But House Budget Committee Chairman Diane Black told Reuters on Friday that she expected the measure to be approved in an Oct. 5 vote.

"We're going to absolutely have the votes," said Black, a Republican. "People are excited about tax reform."

Lawmakers will face a fight to eliminate $4 trillion in tax deductions, loopholes and other "base broadeners", including tax breaks that will be defended by interest groups and lobbyists.

"This is going to make healthcare look like a simple thing to do," Senator Bob Corker, a fiscal hawk, said a day after the latest Senate push to replace Obamacare collapsed. Corker said the plan's goals may not be achievable if lawmakers cannot agree on enough base broadeners.