Million dollar tax bracket picks up steam in the House
Kevin Brady, the chairman of the powerful tax-writing House Ways and Means Committee, has been telling allies that he doesn't like the idea of creating a fourth bracket but he's probably going to have to do it because Republicans are losing so much money from other concessions.
In a closed-door meeting with conservative leaders on Wednesday, Brady left himself some wiggle room. He did not specify that the top rate would likely stay at 39.6% for income over $1 million a year, as Axios scooped over the weekend. The direction Brady gave them was there was likely to be a fourth bracket, though there could be a 1 or 2 percentage point cut to 37 or 38%. One source familiar with the meeting described the move as "symbolic".
The conservative leaders pushed Brady on the idea, telling him he was acquiescing to the Left's arguments about tax cuts benefiting the rich by creating this fourth bracket — and giving up on the original plan which cut the top rate from 39.6 to 35%. They told him that the left and the populist right would hammer him on this point and in the future the top "millionaire" bracket would be an easy political target and lawmakers would likely push it much higher.
A source familiar with the meeting said Brady did not argue with the points. He told the conservative leaders that they were losing a ton of money because Republicans weren't prepared to follow through on their original plan to eliminate the tax break that lets filers write off their state and local income taxes and their property taxes. Getting rid of that tax break would've given the Republicans more than $1 trillion in extra revenue over 10 years, giving them more breathing room to cut taxes. But Brady told the leaders that they were giving away a lot on the property tax side and would therefore lose potentially more than half of those original savings.
Bottom line: The million-dollar bracket is less about politics and much, much more about scrapping for some extra cash to pay for tax cuts. None of the conservatives involved in these conversations, which have included the anti-tax campaigner Grover Norquist, has drawn a red line over this issue. Even the hardest-line conservatives are so desperate for tax reform it looks like they'll suck it up.
Sign up for Axios newsletters to get our smart brevity delivered to your inbox every morning.