Historic tax reform vote lined up with GOP bill finalized
Republicans unveiled on Friday their final, compromise plan to rewrite the tax code, putting them on the brink of a historic victory in Congress that’s sure to reverberate into next year’s elections.
The legislation would cut both business and individual taxes as part of the biggest tax revamp in 30 years. It is poised to be carved into law next week when Congress sends it to President Donald Trump for his signature.
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Republicans are trumpeting the increases in take-home pay millions would see under the plan, while Democrats call it a giveaway to the rich while emphasizing some middle-income people would see their tax bills climb.
House Speaker Paul Ryan told Republican lawmakers on a phone call that the House will vote on the plan Tuesday, before the Senate, according to a person on the call.
The agreement came after last-minute haggling in which Republican leaders bowed to Sen. Marco Rubio’s demands to expand a child tax credit for modest-income families. The Florida Republican, who had threatened to oppose the plan, announced earlier Friday he would support it.
In a surprise decision, Sen. Bob Corker — who had opposed a previous draft over its $1.5 trillion cost — said he too would vote yes, which all but assures passage in the chamber.
At a celebratory press conference following the release of the legislation, a beaming House Ways and Means Chairman Kevin Brady (R-Texas) proclaimed that April 15 would be “the last time you will file under this monstrous, broken tax code.”
The plan which generally hews more closely to a prior Senate draft than a competing House version, includes new details on how Republicans aim to finance the changes. Among them: higher taxes on multinational corporations. They’d face a higher-than-expected one-time tax on their overseas profits, with a 15.5 percent levy on liquid assets and an 8 percent one on illiquid things like factories.
The plan would also make it harder for businesses to use losses in one year to reduce their taxes in another.
Republicans aim to put the legislation to a final vote next week, though the precise timing is unclear with Sens. John McCain (R-Ariz.) and Thad Cochran (R-Miss.) battling health issues. Republicans can only lose two votes in the Senate.
The agreement caps a remarkable legislative stretch in Congress. Facing the prospect of having no major policy achievements in the first year of a new administration, Republicans have pushed the plan through Congress with blinding speed, and in the face of both Trump’s unpopularity and polling showing much of the public is sour on the proposal. They unveiled the initial draft of the plan barely one month ago.
Along the way, lawmakers have been willing to accept things that, in the past, would have had them at each other’s throats. They’re settling for a much higher top individual income tax rate — 37 percent — than many wanted, and their plans to expend the child tax credit would effectively excuse millions of low-income people from paying federal income taxes.
The top individual rate, down from the current 39.6 percent, would apply to earnings over $600,000. There would be six other brackets of 10, 12, 22, 24, 32 and 35 percent. Most individual provisions in the bill would expire in 2025, but Republicans say they are confident they will be extended.
The hugely popular mortgage interest deduction would be pared back, with a new $750,000 limit on eligible loans, down from $1 million. The child tax credit would double to $2,000, with up to $1,400 being refundable — meaning people could get money back if the credit exceeds what they pay in taxes — thanks to Rubio’s efforts.
A long-standing deduction for state and local taxes would be capped at $10,000 for property taxes plus either sales or income taxes. The exemption from the estate tax would be doubled.
On the business side, as expected, the corporate rate would fall to 21 percent next year, from the current 35 percent. An Alternative Minimum Tax on corporations would be repealed. Companies would get expanded write-offs for investments and international tax rules would see the biggest rewrite in a half-century.
Other provisions would end the Affordable Care Act’s mandate to have health insurance, though not until 2019.
Republicans dumped a number of controversial proposals, including plans to end a deduction for medical expenses. Calls to tax tuition waivers for graduate students, change accounting rules so that investors have to pay more on stock sales, and a proposal to end private activity bonds all were nixed.