WASHINGTON — President Trump's upcoming push for his tax cut plan next month will include compromises that will limit some of its current benefits for the nation's richest taxpayers, according to White House officials.

The compromises will include ending a 23.8% preferential tax rate for hedge-fund managers, or the so-called carried interest rate, White House legislative affairs director Marc Short told USA TODAY. "He's not just open to it," said Short. "I would say, frankly, he wants it," he said.

Donald Trump waits with family members Ivanka Trump, left, and Donald Trump Jr. before speaking at a news conference, Jan. 11, 2017, in New York. The news conference was his first as President-elect.
Seth Wenig, AP

Retaining parts of a state and local tax deduction that benefits many middle-class families in blue states is also an area where Trump is expecting compromise as House Republican negotiators hash out legislation capable of winning the support of a number of party members representing high-tax blue states like New Jersey and New York, said Short.

Later in November, Trump may also make his first address from the Oval Office to promote his plan to the nation, said sources involved with the planning who spoke on condition of anonymity because the plans were not final.

During a donor briefing last week in Orange County, California, Short said Trump is open to ideas being discussed on Capitol Hill, including a “reverse cap,” meaning taxpayers under a certain income could retain the benefit, according to one attendee who also spoke on the condition of anonymity. Changes Trump wants to the preferential carried interest income tax rate are unlikely to be supported by House Republican negotiators. leaving it as a bargaining chip in the Senate, where the fight over his plan is expected to be far fiercer. 

The key to Trump’s success in selling the plan to middle America, which he’s dubbing a “middle-class miracle,” may be whether he can convince Americans that he is breaking with traditional Republican party orthodoxy on taxes benefiting the wealthy. Trump will have to make some significant compromises before Democrats agree with him.

Trump’s blueprint collapses individual income tax brackets to three, cuts the top corporate tax rate dramatically and creates a new top rate for small businesses that is lower than the top rate for individuals. It also eliminates two taxes paid entirely by the rich, while taking away a deduction for state and local taxes that is used most heavily in some of the most wealthy, and Democrat-dominated, states.

The plan is drawing criticism for eliminating the estate tax — which benefits the wealthy — while scrapping a state and local tax deduction benefiting many taxpayers living in high-cost states. At the same time, it could balloon the debt by trillions, which Republicans argue would be offset by increased economic growth.

During a bipartisan meeting on Wednesday with the Senate Finance Committee, Trump said his plan is something that should get bipartisan support.

“This is a once-in-a-lifetime opportunity, in my opinion,” Trump said, calling it the largest tax cut in U.S. history. He joked with Sen. Ron Wyden of Oregon, the committee’s top Democrat, that it should get unanimous support. Wyden did not respond but smiled broadly.

White House compromises

The White House appears willing to make some compromises. White House Council of Economic Advisers Chair Kevin Hassett said Trump has given Congress a "huge amount of leeway” to get a bill that gets broad support, including setting where the new top rate should be. 

Yet it's far from clear that the trade offs under consideration will be enough for Democrats.

The challenges for Trump in ferrying his tax plan through Congress were on display Wednesday. After the bipartisan meeting, only Republicans, Sens. John Cornyn, John Thune and Pat Toomey, spoke to reporters. Cornyn said the meeting was “enormously productive” and Toomey said there were areas of bipartisan overlap. Yet no Democrats joined them, they didn’t specify those areas and refused to take questions from reporters.

According to Democrats who attended, Trump also expressed an openness to compromise, for instance, an employer tax credit for keeping jobs in the U.S. proposed by Sen. Sherrod Brown, D-Ohio

Yet later, during a call with reporters, Sen. Bob Casey of Pennsylvania, a Democrat up for reelection in a state Trump won last November, said Republicans aren’t “serious” about a plan primarily benefiting the middle class. “They don’t seem to be serious despite their rhetoric,” said Casey, calling it a “strange credulity” that corporate rate cuts will benefit the middle class. He also said a Republican budget about to be finalized will “lock in” a process allowing a tax bill to pass with only Republican votes.

Democrats are also skeptical that Trump will keep his word, based on recent experience, including Trump’s reversal after negotiating with Democrats on a program for undocumented immigrants brought to the United States as children. They are also worried about being used to create an impression of bipartisanship even as they were excluded from the initial drafting of the plan. “The ignoring (of Democrats) is ongoing,” said Casey.

It was just two days before that Trump excoriated Democrats in a Rose Garden news conference, saying they are "obstructionists" who "basically just want us to do badly."

Playing offense in red states

In another sign of Trump’s offensive posture, White House officials seated Sen. Claire McCaskill, a Missouri Democrat, next to Trump instead of Wyden.

According to an individual close to the White House who dined with Vice President Mike Pence last week, the White House is angry at McCaskill after she’s criticized the tax plan during a series of recent town halls in her state and Trump is trying to send a message to her in particular of the political danger involved in rebuffing his tax plan.

McCaskill is among the Senate's most vulnerable Democrats sitting for reelection, and in a recent rally in Springfield, Mo., Trump urged her constituents to "vote her out" if she doesn't support the plan. Two other Democratic senators in Trump-voting states, Joe Donnelly of Indiana and Heidi Heitkamp of North Dakota, were invited on Air Force One during his visits to their states.

Yet for Democrats like McCaskill, addressing provisions like the carried-interest tax rate may not be enough. “It’s hard to support something when we haven’t seen any details about what is being proposed,” McCaskill said in a statement following the meeting.

Targeting the carried-interest rate is something Trump discussed during his campaign. Trump said people who use the break, primarily venture capitalists and hedge fund managers, are “getting away with murder.” Even so, Trump did not go after the provision in his most recent blueprint.

Trump is hoping to give the plan a major push heading into December, with the assumption that a package will be on its way to the Senate by then. With Trump in Asia for more almost two weeks in November, the final weeks will be critical — both in selling the plan to the public and drumming up support in Congress.  The White House is hoping that, by Thanksgiving, a House package will be on its way to the Senate.

What’s unclear is whether he’s willing to make bigger compromises, for instance, eliminating the estate tax, which the White House says is a big benefit to family-owned farms. Democrats say enriches a handful of the wealthiest Americans since it only affects estates worth more than $5 million.

“They will have to travel a great distance of hundreds and hundreds of millions of dollars to have the rhetoric align,” said Casey.

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