House lawmakers passed the most extensive rewrite of the tax code in 30 years Tuesday, moving one step closer to scoring the first major legislative victory of the 115th Congress.
The House passed The Tax Cuts and Jobs Act 227-203 Tuesday. 12 Republicans and all Democrats voted against the bill. Two members did not vote.
Senators will immediately begin the allotted 10 hours of debate on the bill Tuesday, where it is expected to pass with a simple majority vote.
“I’m confident we’ll pass it in about 10 hours after the House sends it to us, hopefully early tomorrow afternoon,” Senate Majority Whip John Cornyn said Monday. “We’ll pass it either tomorrow night or Wednesday morning.”
If it passes in the Senate, President Donald Trump is expected to sign the legislation into law this week.
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The bill is an amalgamation of the previously passed House and Senate bills.
Instead of shrinking the number of tax brackets from seven down to four, as President Trump campaigned for in 2016, the bill includes seven brackets with stratified rates for income earners. The lowest income earners, under the Republican bill, will pay 10 percent and the highest income earners will pay 37 percent. All of the tax breaks for individuals expire in 2026.
The bill doubles the standard deduction, which could be a political boost for Republicans in 2018 since the most taxpayers take advantage of that feature. Those who itemize their deductions, like taxpayers in New York and California, could see their overall tax bill rise.
Middle-income households are expected to get an almost immediate boon if the bill passes the Senate. The Joint Committee on Taxation released analysis Monday evening that expects middle-income households will get $61 billion in tax cuts in 2019 alone. The top 1 percent of filers can also expect $61 billion in tax cuts that year.
It cuts the rates for the majority of American businesses, permanently lowers the corporate income tax rate to 21 percent and solidifies a rate for corporations to repatriate capital from overseas.
One caveat is that the Republican plan barely touches a loophole in the tax code that exclusively benefits billionaire investors. The loophole, known as carried interest, effectively ensures a home builder or other local business person would pay a higher tax rate on their income than a Wall Street hedge fund manager would pay even on a larger income.
Republicans keep the loophole in place but change it such that investors have to hold an investment for at least 3 years to receive the lower tax rate.
House lawmakers were not able to close all of the tax breaks and deductions they nixed in their bill. The bill passed Tuesday keeps tax-free tuition waivers for graduate students, allows filers to deduct interest on student loans and keeps a number of other favored breaks.
The bill is expected to raise the federal deficit roughly $1.46 trillion over the next decade, a figure that has caused a great deal of backlash from Democrats and the public.
Another feature of the legislation that is drawing flack from Democrats is the repeal of Obamacare’s individual mandate. The mandate is one of the least popular features of the Affordable Care Act and nearly every Republican push to repeal and replace Obamacare in 2017 included a full repeal.
The Congressional Budget Office (CBO) predicted in early November that roughly 13 million Americans would go without health insurance by 2027 if Congress repealed the individual mandate. Any loss in coverage on the exchanges is going to cause concern on the part of those who rely on Obamacare and outcry from Democrats. Despite the expected coverage losses, the nonpartisan office also found the repeal would bring about $338 billion in federal savings over the next decade.
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