Update on Tax Legislation
Late Friday afternoon, House and Senate Republicans released the final text of the negotiated tax bill, which in very much on track to have on President Trump’s desk before Christmas. According to several lawmakers, the House will vote on the bill first, on Tuesday, and then the Senate will vote thereafter.
Republicans are advancing the measure through a process called reconciliation that prevents a filibuster from Democrats in the Senate. Under reconciliation, bills can’t add to the deficit after 10 years, so the bill’s tax cuts for individuals expire after eight years. The corporate tax changes and individual mandate repeal are permanent.
Democrats are expected to maintain opposition against the bill and none are expected to vote in favor of the legislation.
Below are some provisions included in the final package:
- The top individual rate would be lowered from 39.6 percent to 37 percent, which is lower than the top rate in the original bills passed by the House and Senate.
- The measure has seven individual tax brackets, and like both the House and Senate bills, substantially increases the standard deduction.
- The child tax credit is increased from $1,000 to $2,000 and increases the maximum amount that is refundable to $1,400, up from $1,100 in the original Senate measure (a change made to secure Sen. Rubio’s vote; see earlier update).
- The mortgage interest deduction is preserved for existing homeowners; new home owners will have interest capped at loans up to $750,000.
- The charitable giving deduction is preserved.
- State and local tax deduction is capped at $10,000, with filers allowed to deduct property taxes and state and local income and sales taxes.
- The medical expense deduction is preserved.
- The deduction for student loan interest is preserved.
- The exclusion for graduate student tuition waivers is preserved.
- The bill does not repeal the estate tax in whole, but does double the exemption.
- The bill does not repeal the individual AMT but effectively doubles the exemption.
- The bill repeals the Affordable Care Act individual insurance mandate.
- The corporate tax rate will be cut from 35 percent to 21 percent.
- The corporate AMT is eliminated.
- Tax exempt private activity bonds are preserved in the final bill.
- or the alternative minimum tax for individuals, both long-time goals for Republicans, but it does increase the exemption amounts.
- The bill maintains an exception for utilities to deduct interest on capital investments.
- The bill moves the international tax system to a more “territorial system” that does not subject companies’ foreign earnings to US taxes.
- Current offshore assets will be taxes at a one time rate of 15.5% for liquid assets and 8% for illiquid assets – aka repatriation
- Somewhat unrelated, the bill allows for drilling in the Arctic National Wildlife Refuge in Alaska