House Ways and Means Committee Chairman Kevin Brady arrives to the first day of a tax reform markup session on Capitol Hill on on Nov. 6. | John Shinkle/POLITICO Republicans close in on historic tax deal

Republicans are considering a 37 percent top individual tax rate and a 21 percent corporate rate as they start putting the final touches on a sweeping compromise tax overhaul.

The corporate rate would be up slightly from the 20 percent currently in both the House and Senate plans, sources said, while the top individual rate would be a cut from their proposals. The House had kept the current 39.6 percent top rate for those earning more than $1 million, while the Senate set the rate at 38.5 percent.


Negotiators were also discussing a plan to keep seven individual tax brackets, as the Senate called for, rather than paring them to four as the House wants.

Discussions are fluid and Republicans face tight fiscal restraints that limit their room to maneuver. Details surrounding the corporate rate are in particular flux as Republican leaders race to assemble a final bill, other sources said.

Earlier today, negotiators agreed to cap the mortgage interest deduction at $750,000 for newly purchased properties, according to a GOP source, a middle ground between the House and Senate plans.

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Lowering the top individual tax rate would introduce a new element of controversy into legislation that critics already portray as favoring the wealthy. But it would also help Republicans solve a dilemma over a state and local tax deduction, or SALT, that GOP lawmakers from high-income, high-tax coastal states want preserved in some form.

Sen. John Thune, the chamber’s No. 3 Republican, said he would be “open” to a top individual rate of 37 percent.

“There have been suggestions about ways to help solve the SALT problem, one of which is to lower the top rate so it’s one of my points of discussion,” he told reporters.

The fast-moving developments come as Republicans are bent on getting a tax plan to President Donald Trump by next week. Trump is scheduled to make what the White House called his “closing argument to the American people on tax reform” in a speech Wednesday.

Senior administration officials said Trump is not expected to delve into specific provisions, but will focus broadly on how the tax plan would affect Americans. He will be joined in the grand foyer of the White House by five middle-income families and will outline how an overhaul would help each one.

An additional 120 people will attend the speech, the officials said.

The conference committee working on a final tax bill is scheduled to have its first meeting on Wednesday, but key GOP negotiators have said they hope to have a deal in place in the next day or two.

Steeply cutting the current 35 percent corporate rate has been a priority for Republicans. But as they struggled to pay for sweeteners like preserving a state and local tax deduction, the rate came back into play, with Trump suggesting recently it could go up to 22 percent.

Business groups and conservative organizations have objected to going above 20 percent, but an increase is unlikely to be a deal breaker for them.

The approach on the mortgage interest deduction would split the difference between the tax bills that have passed the House and the Senate. The House proposal would allow taxpayer s to write off only the interest on new mortgages of up to $500,000, while the Senate would keep the current policy of cutting off the deduction at $1 million.

The GOP is also trying to make decisions on the estate tax, the a lternative m inimum t ax and the tax treatment of pass-through businesses whose owners pay taxes through the individual side of the tax code.

Key Republicans generally refused to comment on specifics Tuesday, but Sen. Tim Scott (R-S.C.) did say that negotiators were still considering offering a write - off for state and local income taxes. Both the House and Senate bills allow a deduction only for property taxes.

“We’re making progress. The House has been very cooperative. I think we’ve cooperated with their priorities,” Scott said.

Brian Faler and Colin Wilhelm contributed to this report.

