* Bill faces tough road, some business groups oppose it
* Would roll back deduction for state, local taxes
* Bill would cut in half mortgage interest deduction (Adds cost of tax cuts, details of bill)
By David Morgan and Amanda Becker
WASHINGTON, Nov 2 (Reuters) - Republicans in the U.S. House of Representatives unveiled a tax bill on Thursday that would cost $1.51 trillion and deliver deep tax cuts as promised by President Donald Trump, setting off a race in Congress to give him his first major legislative win.
In what would be the largest overhaul of the U.S. tax system since the 1980s, Republicans called for slashing the corporate tax rate to 20 percent from 35 percent, cutting tax rates on companies' foreign profits and on individuals and families.
Congressional passage of the legislation, which would affect nearly every U.S. company and family, was far from certain. Some business groups quickly came out against it and Democrats swiftly condemned it as a giveaway to the rich.
Contentious provisions will test Republicans, who control the White House and both chambers of Congress, but have been unable to deliver major legislative achievements for Trump since the businessman-turned-politician became president in January.
A number of provisions in the bill would hit taxpayers in Democratic-leaning states hardest, such as rolling back deductions for state and local taxes and cutting in half the popular mortgage interest deduction. Lobby groups for the real estate industry and small businesses condemned the legislation.
Titled the Tax Cuts and Jobs Act, it would benefit wealthy Americans by lowering their income taxes, cutting corporate and other business taxes, phasing out over six years the estate tax on inherited assets and repealing the alternative minimum tax.
"This is a very important and special moment for our country, for all Americans. Are we going to let the defenders of the status quo win and see our country continue down this downward spiral?" asked Republican House Speaker Paul Ryan, despite data showing eight straight years of economic growth.
Meeting with Ryan and other key House Republicans, Trump told the lawmakers he was counting on them to maintain the momentum for tax cuts. He repeated his request that Congress send him the legislation to sign into law by the U.S. Thanksgiving holiday on Nov. 23.
That is an ambitious timetable for such a long, multi-faceted proposal that will face a ferocious lobbying battle among business sectors affected by the bill and determined opposition from most Democrats in Congress.
The bill presented by the tax-writing House Ways and Means Committee would consolidate the current number of tax brackets to four from seven: 12 percent, 25 percent, 35 percent and 39.6 percent. An earlier Republican tax outline had called for cutting the top rate for the highest earners to 35 percent.
In the face of criticism for cutting top-earners' taxes, the top 39.6 percent bracket was restored, but the way it is applied in the bill could represent a tax cut for married, high-income earners filing joint returns.
On housing, the National Association of Home Builders said the bill would damage home prices and punish urban homeowners.
"We're concerned if enacted, this bill will throw us back into another housing recession," Jerry Howard, the group's president, said in an interview.
The group said the provision in the bill capping the mortgage interest deduction for future home purchases at $500,000 - half the current amount - was unacceptable.
The bill would also repeal the existing deduction for state and local income and sales taxes and cap the deduction for state and local property taxes at $10,000. Those provisions would hammer Americans in high-tax states such as California, New York, New Jersey, Pennsylvania and Illinois.
The National Federation of Independent Business, a powerful small business lobby, came out against the bill. The U.S. Chamber of Commerce, the largest lobbying group in Washington for large companies, backed the Republican tax package.
With Democrats solidly opposed, Republicans can ill afford to lose many votes from within their own ranks as they aim to pass the bill in the coming weeks, especially in the Senate where they have only a slim majority.
"Ultimately, what the American people really get from this tax plan is a huge bill for the debt incurred to pay for tax breaks that line the pockets of Donald Trump personally along with his billionaire buddies. Like a Trump University degree, it is phony," said Texas Democratic Representative Lloyd Doggett.
Ways and Means Committee Chairman Kevin Brady said the bill as currently drafted would add $1.51 trillion to the deficit over a decade, $100 billion more than allowed under a budget passed by Congress that would let the measure pass the House and Senate with no Democratic votes. Brady predicted that final legislation would be within the $1.5 trillion limit.
Congress' Joint Committee on Taxation estimated late on Thursday that the bill would reduce federal tax revenues over 10 years by $1.49 trillion.
The bill's architects avoided a likely showdown with millions of Americans by deciding not to seek changes to the popular tax-deferred 401(k) retirement savings program.
The bill would roughly double the standard deduction for individuals and families. But it would repeal a personal exemption of $4,050 that taxpayers can currently claim for themselves, their spouses and any dependents.
The legislation would also subject large private universities to a 1.4 percent excise tax on investment income and repeal a long-standing prohibition on religious institutions being involved in political activities.
The bill would cap the maximum tax rate on small businesses and other non-corporate enterprises at 25 percent, down from the existing maximum rate on "pass-through" income of 39.6 percent. It would set standards for distinguishing between individual wage income and actual pass-through business income to prevent tax-avoidance abuse of the new, lower tax level.
It would create a 10 percent tax on U.S. companies' high-profit foreign subsidiaries, calculated on a global basis, in a move to prevent companies from moving profits overseas.
Foreign businesses operating in the United States would face a tax of up to 20 percent on payments they make overseas from their American operations.
U.S. equities have rallied in 2017 to a series of record highs, partly on expectations of deep corporate tax cuts.
Shares of U.S. homebuilders fell after the bill was released, with luxury homebuilders including Toll Brothers taking the biggest hit. As investors parsed its provisions, the Dow Jones Industrial Average closed up modestly.
The Ways and Means Committee will begin formal consideration of the bill on Monday before the full House can vote on it. It also must pass the Senate, where Republicans hold a slimmer 52-48 majority and failed earlier this year to garner enough votes to approve a major healthcare overhaul sought by Trump.
Writing by Will Dunham; Editing by Kevin Drawbaugh and Peter Cooney