Tom Brenner/The New York Times)
Rep. Kevin Brady (R-Texas), chairman of the House Ways and Means Committee, places Internal Revenue Code books along the bar before the Republican tax reform bill markup on Capitol Hill in Washington, Nov. 6, 2017. The committee is considering and amending the bill, with the goal of passing it out to the House floor by the end of the week.
By ALAN RAPPEPORT, THOMAS KAPLAN and JIM TANKERSLEY
© 2017 New York Times News Service
WASHINGTON — Republicans outlined significant changes on Monday to the sweeping tax bill unveiled by House lawmakers last week, moving to tighten restrictions on carried interest, alter rules aimed at preventing U.S. companies from stashing profits offshore and further restrict a tax credit claimed primarily by low- and middle-income individuals
The changes came as part of an amendment, submitted by Rep. Kevin Brady, R-Texas, chairman of the House Ways and Means Committee. The panel, voting along party lines, approved the amendment Monday night as the official process of debating the bill began.Among the most significant changes is a provision that would aim to close the carried interest loophole, which has been a source of ire among Democrats and some Republicans, who argue it is an unwarranted tax break for the wealthiest Americans.
Under the current tax code, that compensation is treated as capital gains, meaning it is taxed at a rate of 23.8 percent, well below the 39.6 percent income-tax rate that now applies to the top tier of individual earners.
Brady’s amendment would require investors such as hedge fund managers and real estate developers to hold on to assets for a period of three years to qualify for the lower capital gains rate on their income. The move would essentially seek to weed out those who use the loophole to avoid paying ordinary income tax rates on their earnings.
Brady, speaking on CNBC, said the effort was intended to “make sure it really is focused on those long-term, traditional real estate partnerships.”
Other changes to the bill included tweaks to the treatment of the earned-income tax credit, which is primarily used by lower- and middle-income workers. Eligibility for the earned-income credit depends on income and family size. About 26 million people received the credit last year, and the average credit was more than $2,400, according to the Internal Revenue Service.
Brady said the change was intended to “protect the integrity” of the tax credit. The amendment would require employers to provide more information about their employees and give the Internal Revenue Service more power to verify the pay that workers report.
