The Ways & Means Committee finishes. By party-line vote, the panel gave its final OK to the Tax Cuts and Jobs Act yesterday. But not before Chairman Kevin Brady made one more round of changes. The revisions included winners—small pass-through businesses would get a special rate of just 9 percent on their first $75,000 of income—and losers—it raised the repatriation tax rate on foreign income of US-based multinationals to 14 percent for cash and 7 percent for other assets, up from 12 percent and 5 percent in an earlier version.
And the Finance Committee gets started. Late last night, the panel released a detailed summary of chairman Orrin Hatch’s draft. While his plan would broadly follow the same track as the House bill, some provisions would be a sharp departure from the House Ways & Means Committee version and some stated preferences of President Trump.
Some details. The draft would cut the corporate tax rate from 35 percent to 20 percent, but not until 2019. It would cut taxes on pass-through businesses by allowing them a 17.4 percent deduction for qualified domestic income. For individuals, it would retain seven individual income tax rates, with a top rate of 38.5 percent. It would increase the standard deduction but repeal the personal exemption. It would increase the child tax credit but not create a new family credit as the House would. It would repeal the Alternative Minimum Tax and reduce but not repeal the estate tax. It would repeal the entire state and local tax deduction but retain the mortgage interest deduction. The Finance outline was silent on repeal of the Affordable Care Act’s tax penalties for those who do not have health insurance—a priority of Trump’s.
Slower, and more amenable to Democrats? Senator John Thune told CBS This Morning that he believes the Senate can pass its tax bill by January 1. He’s optimistic that the bill may attract support from some Senate Democrats. The Finance Committee plans to begin its mark up of the legislation next week.
Why this tax bill is so hard. TPC’s Bill Gale concludes that life would be easier for the House GOP if it just pushed a $1.5 trillion tax cut, instead of a $5.8 trillion gross tax cut partially offset with a $4.3 trillion tax increase. A smaller stand-alone tax cut would avoid both creating high expectations and generating powerful opposition from those who would lose existing tax breaks.
Rep. Bob Goodlatte won’t seek reelection. The Chair of the House Judiciary Committee says he plans to spend more time with his granddaughters. And perhaps muse over crushing defeat suffered by his state’s GOP in this week’s races for governor and House of Delegates. For years, Goodlatte was a major impediment to congressional passage of an online sales tax bill.
Interested in subscribing to the Daily Deduction, the Urban-Brookings Tax Policy Center summary of the day’s tax news? Sign-up here to get the Daily Deduction delivered to your inbox every morning. If you’d like to tell us about a new research paper or have any comments about our feature, email us.
Posts and Comments are solely the opinion of the author and not that of the Tax Policy Center, Urban Institute, or Brookings Institution.
- © Urban Institute, Brookings Institution, and individual authors, 2016.