WASHINGTON (Reuters) - Republican lawmakers on Monday began revising their proposed overhaul of the U.S. tax code, as Democrats pointed to the loss of popular deductions as proof the legislation was an assault on the middle class.

U.S. President Donald Trump holds sample tax forms as he promotes a newly unveiled Republican tax plan with House Republican leaders in the Cabinet Room of the White House in Washington, U.S., November 2, 2017. REUTERS/Carlos Barria

A draft bill unveiled last week by Republicans in the House of Representatives, if enacted, would be the biggest restructuring of the tax system since the 1980s and the first major legislative victory of the Trump presidency.

One of the first changes agreed to on Monday, related to carried interest, would go toward fulfilling one of President Donald Trump’s campaign promises.

Republican Representative Kevin Brady, chairman of the House tax-writing panel, offered to make smaller portions of Wall Street financiers’ income eligible for a lower capital gains tax rate.

It was one of many revisions that are expected as the House Ways and Means Committee amends the tax bill. Brady pledged to lawmakers that they would have a chance to propose their own changes. “Let me assure you this is the beginning of the tax reform process,” he told the committee.

Although Republicans generally support the bill’s broader themes, including a sharp cut in the corporate income tax, there are rumblings of dissent over other elements, including repeal of the deduction for state and local income tax (SALT) payments.

New York, California and other high-tax states would be hard hit by the removal of that deduction, a fact seized upon by Democrats to bolster their argument that Trump’s plan is a gift to the wealthiest Americans and the corporate sector.

“There are a lot of people expecting a tax cut who will be big losers under this bill,” Representative Bill Pascrell of New Jersey, a Democrat on the House Ways and Means Committee, said as the tax-writing panel convened to consider the bill.

An analysis of how taxpayers would be impacted by the bill from the nonpartisan Tax Policy Center issued on Monday was later withdrawn due to an error. TPC said that its analysis contained an error related to a proposed child tax credit and that it would release a revised version as soon as possible.

The White House argues that tax cuts are needed to boost economic growth and create jobs.

The linchpin of the plan is the reduction of the corporate tax rate to 20 percent from 35 percent and establishment of a 25 percent tax rate for “pass through” businesses, which currently pay income tax rates as high as 39.6 percent.

With Democrats united in opposition to the plan, Republican defections from a few traditionally Democratic-leaning states could be enough to torpedo it in the House.

Brady has already agreed to retain the deduction for property tax payments up to a cap of $10,000 as part of a SALT compromise and has said he would be open to raising it.

Brady’s carried interest provision would lengthen to more than three years from one the amount of time Wall Street financiers must hold assets in order to be eligible for a lower tax rate.

Carried interest is a share of an investment fund’s profits – typically about 20 percent beyond the return guaranteed to investors – that goes to the general partners of private equity, venture capital and hedge funds.

Under current law, high-income fund partners pay the long-term capital gains rate of 20 percent on their carried interest income, instead of the 39.6 percent individual tax rate that applies to the ordinary wage income of high earners.

MARKET RALLY ON EXPECTATIONS

Securing congressional passage of the tax plan is critically important to Trump, who has yet to get major legislation through Congress since taking office in January, including a healthcare overhaul he promised as a candidate last year.

Investors are adding to the pressure. The expectation of deep tax cuts has helped fuel a stock market rally during Trump's time as president, with the broad S&P 500 index .SPX up about 14 percent.

The Senate, where Republicans have a 52-48 majority, is developing its own version of the tax legislation, which would have to eventually be reconciled with the House version before it is sent to Trump for signing.

Several Republican senators have said they would have a problem voting for any tax bill that significantly increased the deficit. The House bill is projected to add $1.5 trillion over 10 years to the $20 trillion national debt.

Fitch Ratings said on Monday that the House bill could add to the fiscal strain in some states and local jurisdictions by limiting their tax-raising flexibility.

Republican leaders are pushing for the House to vote on a revised tax bill before the U.S. Thanksgiving holiday on Nov. 23. They have said a draft Senate bill could be ready at the end of this week.

The Republican tax plan was devised without Democratic input. The last major tax restructuring, Republican former President Ronald Reagan’s 1986 overhaul, received significant input and support from Democrats.