Exclusive: Trump, GOP to cut top rate to 35 percent - Axios
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Exclusive: Trump, GOP to cut top rate to 35 percent

President Trump and Republican leaders plan to cut the top tax rate for the wealthiest Americans to 35 percent and dramatically reduce taxes on big and small businesses, according to details leaked to Axios.

Why it matters: It's the first glimpse of the tax reform plan agreed upon in secret between the "Big Six" congressional leaders and administration officials. It forms the starting point of the tax reform process, which will play out over the coming months.

The big change: The GOP leaders and the White House plan to cut the top tax rate for “pass through" businesses from 39.6 percent to 25 percent. (Most businesses in America do not pay the corporate tax. Sole proprietors and other mostly smaller businesses see their profits “passed through” to their owners and taxed at the individual income rate.)

The so-called "Big Six" tax framework — named because it's been hashed out behind closed doors between six top Republicans and administration officials — will set up a clash with Democrats over the tax breaks that apply to large corporations and upper income Americans.

  • Most Democrats have already drawn a red line on tax reform: 45 out of 48 Democratic senators signed a letter saying they wouldn't support any tax bill that adds to the deficit or offers new tax breaks to the wealthiest Americans.
  • But Republicans are desperate for a win and appear on course to fund tax cuts with a blend of deficit spending and the closing of loopholes. They will dare Democrats, especially the 10 senators up for re-election in states Trump won, to vote against tax breaks for their constituents.

What's next: President Trump is planning to give a speech unveiling the Big Six framework in Indiana on Wednesday, three sources said. The framework is the starting point for the tax reform process. It reflects the shared view of the Big Six, but it will inevitably change substantially as it goes through the normal legislative processes in the House and Senate.

(The "Big Six" are House Speaker Paul Ryan, Senate Majority Leader Mitch McConnell, Treasury secretary Steven Mnuchin, White House economic adviser Gary Cohn, and the chairmen of the two tax-writing committees — Senate Finance Committee chairman Orrin Hatch and House Ways and Means chairman Kevin Brady.)

The details, per three sources with knowledge of the plan:

  • Top individual tax rate cut from 39.6 to 35. The current seven income tax brackets collapsed to three, as part of simplification. (Axios hasn't obtained the other two rates.)
  • Axios can confirm that the Big Six agreed to cut the corporate tax rate from 35 percent to 20 percent. That key detail leaked last night to the Washington Post. (Trump has said he wants the corporate rate to be 15 percent.)
  • The Big Six framework is also expected to include guardrails to prevent wealthy people from artificially lowering their income taxes by rearranging their affairs to get taxed at the small business rate.
  • We can confirm, too, WashPo's reporting that Republicans plan to double the standard deduction — a boost for the middle class and a key component of simplification.

These Big Six decisions have been held incredibly tightly, but details began leaking out around Capitol Hill on Friday night and the corporate rate was first published by the Washington Post's Hill team. By Saturday, influential figures on K Street were beginning to learn more details.

Some problems the Big Six could run into:

  • The National Federation of Independent Business (NFIB,) the leading small business association, wants to equalize the small business rate and the corporate rate. Under the current plan, that's not happening. The corporate rate will be 20 percent and the small business rate 25 percent. "That's going to be controversial, but it's not a deal-breaker I don't think," said a source close to the process.
  • House conservatives — especially the Freedom Caucus — haven't been involved in the Big Six discussions and they want the corporate rate to be much lower, at 16 percent. Republican leaders say there's no way that's going to happen, and Treasury Secretary Mnuchin agrees.
  • The Trump tax plan will likely add to deficits, at least in the short term, which will bother some deficit hawks. But tax reform advocates were heartened when, just this week, Senate Republicans on the Budget Committee cut a deal that would reduce government revenue by as much as $1.5 trillion over 10 years. Republicans argue that, with economic growth spurred by the tax reform, there'll be substantially less lost revenue than $1.5 trillion.
  • Realtors and home builders won't be happy with the doubling of the standard deduction. That's because lots more people will take the standard deduction and many fewer will itemize their tax returns. A prevailing belief in the real estate world is that under those conditions, fewer people will take the mortgage interest deduction, which could mean fewer homes being purchased.
  • Whichever groups are hit up for the "pay-fors" — the loopholes being closed — will inevitably form lobby groups and oppose those elements of the plan.

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School named after Jefferson Davis renamed for Barack Obama

Photo: Manuel Balce Ceneta / AP

A Mississippi elementary school will be changing its name from Davis Magnet International Baccalaureate Elementary — after Confederate leader Jefferson Davis — to the Barack Obama Magnet International Baccalaureate Elementary.

Why it matters: PTA President Janelle Jefferson said Obama was the "number one choice" among the students. Jake McGraw, public policy coordinator of the University of Mississippi's Institute for Racial Reconciliation, told NBC News the students' choice "shows that we don't need to shy away from exploring these controversial topics."

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U.S. support of South Sudanese military may have broken the law

Madut Quat wears a T-shirt depicting Barack Obama as he stands in the overcrowded United Nations' protected camp in Wau, South Sudan. Photo: AP

The U.S. government may have broken its own law by providing support to the South Sudanese military, which has displaced over a million people in what the U.N. labeled "ethnic cleansing," according to an AP investigation. Per the AP, this is the "largest exodus of civilians in Africa since the Rwanda genocide in 1994."

Why it matters: A U.S. Defense Department official, Kate Almquist Knopf, told the AP this is happening "on America's watch." South Sudan's government received over $1 billion a year in support under both the Bush and Obama administrations. And in 2016, a letter from President Obama to Congress allowed training for the South Sudanese army, which "circumvented a law blocking U.S. support for countries that use child soldiers," the AP reports.

What happened:

  • The law in question says that the U.S. is prohibited from supporting "any unit that has committed a gross violation of human rights."
  • Obama sought a long-term relationship with the South Sudanese military, trying to "fix" it, the AP reports. That was after South Sudanese soldiers "killed a journalist, gang-raped women and beat people, including Americans, as they rampaged through a hotel."
  • The United Nations did not send requested peacekeeping troops to the region, and it is currently still considering sending a permanent peacekeeping force. There are currently 12,000 peacekeepers in the country, but there would need to be around 38,000 more to fully secure South Sudan, the AP reports.
  • Sen. Patrick Leahy called U.S. support a "red flag." A State Department spokesperson told the AP that those who received U.S. support were vetted.
The bottom line: A South Sudan researcher, Alan Boswell, told the AP that the U.S. stance was that America did not cause the problem, which meant "we were not going to try and stop it."
Why you'll hear about this again: U.S. ambassador to the U.N., Nikki Haley, is visiting South Sudan next week to seek a solution to the ongoing, four-year conflict.
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Trump urging House Republicans to pass Senate budget as shortcut to tax reform

Photo: Evan Vucci / AP

President Trump has begun calling House Republicans to urge them to pass the Senate budget without going to conference, according to three sources familiar with the calls.

The House passed a budget earlier this month that has more conservative wins, particularly on spending cuts, than the one expected to pass the Senate. But the budget process is primarily a vehicle to get to tax reform, and Trump doesn't want to wait for the House and Senate to work out a compromise. Paul Ryan has previously indicated that he plans to take the budgets to conference.
Why this matters: Trump needs a win urgently and wants to move on to tax reform as quickly as possible. But expect some consternation among fiscal conservatives in the House if Trump gets his way and they're asked to vote on the Senate budget.
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Blue Apron announces layoffs

Bree Fowler / AP

Blue Apron, the meal kit company that went public earlier this year, announced on Wednesday that's its cutting about 6% of its staff company-wide, according to a new SEC filing. The layoffs will cost the company $3.5 million in expenses such as severance packages.

Background: Blue Apron, which ships individually packaged kits for preparing meals, has been struggling since it went public in June. Shortly after, Amazon announced its plans to start selling meal kits, and at last two groups of shareholders later filed lawsuits against Blue Apron, alleging it misled investors about its business before going public.

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Cochran says he has no plans to retire despite health questions

Sen. Thad Cochran. Photo: J. Scott Applewhite / AP

Senator Thad Cochran, who has faced many questions about his health over the years, told reporters on Wednesday that he isn't retiring, according to Politico.

Why it matters: Cochran, who turns 80 years old in December, is the chairman of the Appropriations Committee, overseeing billions of dollars in government spending every year. And, as he's up for reelection in 2020, Politico reports the GOP is "desperate for him to stay in office and avoid a special election."

Concerns about his health were raised this week, as he seemed confused when asked if he would remain Appropriations chairman, and had to be reminded where the Senate chamber was located, per Politico.

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White House drafted, but shelved, Niger response

Soldiers bring home the body of Army Staff Sgt. Dustin Wright of Lyons, Georgia, who was killed in the Niger ambush. Photo: Staff Sgt. Aaron J. Jenne / U.S. Air Force via AP

A staffer drafted a statement of condolence for President Trump to issue on Oct. 5 — the day four U.S. soldiers were killed in an ambush in Niger — but Trump never delivered the remarks, Politico reports.

Why this matters:

  • At a Monday press conference, nearly two weeks after the ambush and the drafting of the statement, Trump fielded criticism about his silence in light of the soldiers' deaths. He responded with the false claim that past presidents, including Obama, never called the families of soldiers killed in action.
  • Tuesday, Press Secretary Sarah Sanders said Trump called all four families to offer condolences. But the White House found itself embroiled in another controversy as Rep. Fredericka Wilson called the president "a sick man" for telling one widow her husband "knew what he signed up for." Trump denied that he said those words, but Sanders did not.

The drafted statement, via Politico:

"Melania and I are heartbroken at the news that three U.S. service members were killed in Niger on October 4 while providing guidance and assistance to Nigerien security force counter-terror operations. We offer our deepest condolences to the families and friends of these brave American soldiers and patriots. They will remain in our thoughts and prayers. We are also praying for the two U.S. service members who were injured in the incident. We wish them a complete and swift recovery. The heroic Americans who lost their lives yesterday did so defending our freedom and fighting violent extremism in Niger. Our administration and our entire nation are deeply grateful for their sacrifice, for their service, and for their patriotism."


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Trump’s mixed signals on health care deal

Trump met with Senate Finance Committee chairman Orrin Hatch and other committee members this morning. Photo: Susan Walsh / AP

White House press secretary Sarah Huckabee Sanders now says President Trump doesn't support the bipartisan Senate health care deal in its current form. That should settle questions about his position for now, but that's after 24 hours of mixed signals that left some of his own advisers unclear where he really stands, as recently as this morning.

What we're hearing: Before Sanders' briefing this afternoon, a senior administration official told us that everyone is hearing what they want to hear, and nobody knows exactly what Trump wants from hour to hour or where he will land. To some extent, his own advisers are never completely sure. But it's fair to say that everyone who is remotely conservative inside the administration is pushing not to keep funding the Affordable Care Act's insurer subsidies without serious concessions.

What's at stake: The deal by Sens. Lamar Alexander and Patty Murray would fund the insurer subsidies for two years, as well as the rest of this year, after Trump said he was going to cut them off. In exchange, states would get an easier waiver process so they don't have to follow all of the ACA coverage rules.

What Trump has said:

  • Yesterday, after meeting with the Greek prime minister: “it is a short-term solution so that we don't have this very dangerous little period — including dangerous periods for insurance companies, by the way ... For a period of one year, two years, we will have a very good solution. But we're going to have a great solution, ultimately, for health care."
  • Last night, in speech to the Heritage Foundation: "While I commend the bipartisan work done by Senators Alexander and Murray -- and I do commend it -- I continue to believe Congress must find a solution to the Obamacare mess instead of providing bailouts to insurance companies."
  • This morning on Twitter, after Axios event with Alexander: "I am supportive of Lamar as a person & also of the process, but I can never support bailing out ins co's who have made a fortune w/ O'Care."
  • This morning, before a meeting with Senate Finance Committee members: "If something can happen, that's fine. But I won't do anything to enrich the insurance companies."

What Sanders said this afternoon: "A good step in the right direction," but “it's not a full approach, and we want something that goes a little bit farther."

Who's against the deal: House Speaker Paul Ryan — which would make it hard to get the bill through the House, even if it gets through the Senate. Office of Management and Budget director Mick Mulvaney has also said the administration wouldn't support an Alexander-Murray bill without big concessions.

Who's for it: It's clearly in Democrats' interests to keep the ACA markets from falling apart, but there's also significant support among Senate Republicans for stabilizing the markets, Sen. John Thune told Caitlin Owens yesterday.

Go deeper: Mike Allen on Trump's improvisational style.

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Ex-Google exec: Sun may be setting on Silicon Valley

Section 32 founder Bill Maris

Photo by Brian Ach/Getty Images

Former Google Ventures CEO Bill Maris, who currently runs a San Diego-area VC firm called Section 32, offered some words of warning today during a Wall Street Journal tech conference:

It wouldn't surprise me if the sun is setting on the golden age of Silicon Valley.

Maris added that he also wouldn't be surprised if federal regulators try breaking up tech giants like Google or Facebook, saying that such companies "are more powerful than AT&T ever was."

Featured

Forest degradation makes Amazon vulnerable to mega-fires

Smoke billows from the Amazon Rainforest. Photo: Dado Galdieri / AP

This year is on track to be the worst on record for forest fires in the Amazon, per the Brazilian government. The fires are doing the most damage in the areas of the forest already hit by human-caused forest degradation, Mongabay reports.

  • Distinct from deforestation, forest degradation is the process of felling just the valuable trees in a forest and leaving behind flammable tree limbs and debris, creating a ground zero for wildfires.
  • Why it matters: Climate change, deforestation and forest degradation are causing mega-fires that are devastating large swathes of the Amazon rainforest. Carbon emissions from the fires have the capacity to impact climate around the world.

The details:

  • The Amazon is currently experiencing a prolonged drought — lasting up to four months in some parts — which is contributing to the spread of the fires. And "the dry seasons in Brazil seem to be becoming drier and more frequent," scientist Luiz Aragão told Mongabay.
  • As of October 5, 208,278 hot spots have been seen in the region using thermal sensing. Fire brigades lack the manpower and resources to control them.
  • Forest degradation has transformed the Amazon from a carbon sink to a carbon source. Meanwhile, the uptick of carbon emissions around the world are contributing to bigger fires globally. The concurrent trends comprise a recipe for more mega-fires, scientists say.
  • "If Brazil is to have a chance at controlling the intensity of fires in the Amazon, it needs all countries — including the U.S. — to successfully reduce carbon emissions," Mongabay reports.
Facts Matter Featured

Puerto Rico, by the numbers

A boy accompanied by his dog watches the repairs of Guajataca Dam, which cracked during the passage of Hurricane Maria. Photo: Ramon Espinosa / AP

Exactly one month after Hurricane Maria first made landfall in Puerto Rico, the island is still far from resembling any sense of normalcy. 81% of the island is still without power, 28% is without potable water, and 10% of grocery stores are still closed.

The official death toll is still 48, but the actual number is expected to be much higher as several parts of the island remain cut off from communication. A recent Vox report, which cross-referenced what the government had been saying with reports on the ground, puts the real number of casualties much closer to 450, with another 69 people still missing.

What they're saying

  • Press Secretary Sarah Sanders said Wednesday that the Trump administration is "continuing to do everything that we can to help the people of Puerto Rico," and announced that Gov. Ricardo Roselló will at the White House tomorrow.
  • Gov. Roselló said his visit is timed to press the Senate to quickly pass the $4.9 billion relief package that's been proposed. "Time is of the essence and we need quick action," he said. "If we are not considered in equal terms to Florida, the Virgin Islands, Texas and so forth, Congress will have to deal with a worsened humanitarian crisis, massive exodus from the island, health care problems and more."
  • Celebrity chef José Andrés launched a relief effort, #ChefsForPuertoRico, through his nonprofit World Central Kitchen. Together, Andrés, his team and hundreds of volunteers have served more meals on the island than the Red Cross."When we go to a place, we take care of that place until we feel it has the right conditions to sustain itself. That's what a relief organization should be," said Andrés.

The facts

The latest on what we know from Puerto Rico, per FEMA and the PR government site:

  • Boots on the ground: More than 20,000 federal civilian personnel and military service members, including more than 1,700 FEMA personnel, are on the ground in Puerto Rico and the U.S. Virgin Islands.
  • State help: 31 U.S. states are helping in PR, and 20 in the U.S. Virgin Islands.
  • Electricity: 19% of the island has power, up from 14% Monday. Roughly 46% of cell towers have been restored.
  • Food: Approximately 90% of grocery stores are open (410 of 456).
  • Gas: Roughly 79% of retail gas stations are operational (873 of 1,100).
  • Shelter: 4,702 people remain in shelters across the island, down from 5,037 Monday. 100 shelters are open and operating.
  • Transportation: Only 392 miles of Puerto Rico's 5,073 miles of roads are open. All commercial airports and federally maintained ports are open, some with restrictions.
  • Water and waste: Approximately 72% of Puerto Rico Aqueduct and Sewer Authority (PRASA) customers have potable watey. 56% of waste water treatment plants are working on generator power, the same as Friday.
  • Medical care: 95% (64/67) hospitals are open, down from 97% Friday. Many remain on backup power systems, and are without air conditioning. 95% (46/48) of Dialysis Centers are open, the same as Friday.
  • Banks: 65% of bank branches (203 of 314) are open and operating.
Go deeper: Puerto Rico Mayor Javier Garcia Perez delivers food and finds desperation (CNN); Puerto Rico faces a demographic disaster (Washington Post); FEMA Chief Blamed for Katrina Response Says Same Problems Are Happening in PR (TIME)
This post is being updated with the latest information on the Puerto Rico recovery efforts.