Donald Trump's tax overhaul faces growing opposition as Congress readies Bill

US President Donald Trump listens during a briefing in Dallas, Texas.
US President Donald Trump listens during a briefing in Dallas, Texas. PHOTO: REUTERS

WASHINGTON (REUTERS) - President Donald Trump's plan for overhauling the US tax system faced growing opposition from interest groups, as Republicans prepare to unveil sweeping legislation that could eliminate some of the most popular tax breaks to help pay for lower taxes.

Republicans who control the US House of Representatives will not reveal their Bill until Wednesday (Nov 1).

But the National Association of Home Builders (NAHB), a powerful housing industry trade group, is already vowing to defeat it over a change that could affect the use of home mortgage deductions, while Republican leaders try to head off opposition to possible changes to individual retirement savings and state and local tax payments.

Trump and Republicans have vowed to enact tax reform this year for the first time since 1986. But the plan to deliver up to US$6 trillion (S$8.2 trillion) in tax cuts for businesses and individuals faces challenges even from rank-and-file House Republicans.

House and Senate Republicans are on a fast-track to pass separate tax Bills before the Nov 23 US Thanksgiving holiday, iron out differences in December, send a final version to Trump's desk before January and ultimately hand the President his first major legislative victory.

Analysts say there is a good chance the tax overhaul will be delayed until next year.

The NAHB, which boasts 130,000 member firms employing nine million workers, says the Bill would harm US home prices by marginalising the value of mortgage interest deductions as an incentive for buying homes. The trade group wants legislation to offer a tax credit equalling 12 per cent of mortgage interest and property tax payments but says it was rebuffed by House Republican leaders.

"We're opposed to the tax Bill without the tax credit in there, and we'll be working very aggressively to see it defeated," NAHB chief executive Jerry Howard told Reuters.

House Ways and Means Committee chairman Kevin Brady, the top House Republican on tax policy, suggested in a statement that the NAHB credit could still be included, saying: "I hope members of Congress will examine it closely to determine if they want it included."

Republicans warned that the Trump tax plan is entering a new and difficult phase as lobbyists ramp up pressure on lawmakers to spare their pet tax breaks.

"When groups start rallying against things and they succeed, everything starts unraveling," Senator Bob Corker, a leading Republican fiscal hawk, told CBS' Face the Nation.

ANXIETY IN HIGH-TAX STATES

One of the biggest challenges involves a proposal to eliminate the federal deduction for state and local taxes (Salt), which analysts say would hit upper middle-class families in high income tax states such as New York, New Jersey and California. The states are home to enough House Republicans to stymie legislation.

Brady gave ground over the weekend, saying he would allow a deduction for some local taxes to remain.

"We are restoring an itemised property tax deduction to help taxpayers with local tax burdens," Brady said in another statement.

But the gesture appeared to do little to turn the tide of opposition to Salt's elimination.

"I'm not going to sign onto anything until the full package is fully analysed by economists," Representative Peter King of New York told the Fox News programme Sunday Morning Futures.

"The fact that we're getting it at the eleventh hour raises real issues with me," he added.

A lobby coalition representing state and local governments, realtors and public unions rejected Brady's statement outright, saying the move would "unfairly penalise taxpayers in states that rely significantly on income taxes".