House Passes Sweeping Tax Reform Bill
The House passed a comprehensive tax reform bill Thursday in a significant step toward fulfilling the GOP leadership’s goal of placing a bill on President Donald Trump’s desk by the end of the year.
The bill passed 227 to 205, with 13 Republican defectors and no supporting votes from Democrats. The House version slashes the corporate rate from 35 to 20 percent, collapses the existing seven income brackets down to four and eliminates a plethora of popular deductions, resulting in a total of $1.4 trillion in individual and business tax cuts over the next decade.
“For the first time in 31 years we are wiping the tax code clean and replacing it with one that is fairer and simpler for everyone,” GOP Rep. Devin Nunes of California, a member of the Ways and Means Committee, told the New York Times.
Republican leadership was ultimately unable to win over lawmakers from high tax states like New York and New Jersey, who remained opposed to the bill because of its elimination of the state and local tax deduction, a provision that compensated residents of high tax states by granting them deductions on their federal income tax. The House version keeps the property tax deduction but caps it at $10,000, a concession that proved insufficient in winning over the New York and New Jersey delegations.
Under the House plan, individuals will be taxed at 12, 25, 35 and 39.6 percent respectively. The bill also increases the standard deduction from the current $12,700 to $24,400 per year and increases the child tax credit, in an effort spearheaded by Ivanka Trump and husband Jared Kushner, from $1,000 to $1,600.
In addition to lowering the corporate rate by 15 percent, the bill also moves the U.S. toward a structure that taxes companies based solely on their U.S. revenue, rather than their total global earnings. A measure designed to incentivize multinational corporations to return profits to the U.S. rather than keeping them in offshore tax shelters.
Individuals who report business earnings on their personal tax returns, such as sole proprietorships, partnerships and S corporations, would have their top rate lowered to 25 percent under the bill, rather than being taxed at the current top individual rate of 39.6 percent.
The GOP still faces the ominous task of reconciling the now passed House version with a Senate draft that is working its way through the Finance Committee and diverges from its counterpart on a number of key issues.
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