Washington, DC, USA : The US Senate – in a 51-49 vote – approved a $1.4 trillion massive sweeping tax overhaul early Saturday morning, it’s version of the Tax Cuts and Jobs Act. Tennessee Republican Bob Corker was the only Republican to vote against the legislation, joining all 48 Democrats in opposing the sweeping overhaul of the nation’s tax laws.
Passage of the tax bill is a significant victory for Senate Majority Leader Mitch McConnell and the GOP in general, who have struggled to fulfill many key legislative promises.
The bill is projected to add $1.4 trillion to the deficit over 10 years. The Joint Committee on Taxation reported on Thursday that the economic stimulus from the bill would only make up $400 billion of that.
That figure raised concerns with some Republicans, including Flake and Corker, who wanted the legislation to include a trigger mechanism that would force tax increases or spending cuts if the overhaul failed to grow the economy.
That idea was rejected Thursday after the Senate parliamentarian told lawmakers that doing so would likely violate complex Senate budget rules. A number of other GOP lawmakers say they believe the JCT figure underestimates the positive impact of the tax bill.
“This bill will end up reducing the deficit, because there will be economic growth,” Ohio Sen. Rob Portman contended. “I feel very good about the fiscal situation.”
Senators must now go into conference with House members next week, House-Senate conference committee, to work out differences in the two versions of the Tax Cuts and Jobs Act. If they can come to an agreement, both chambers would have to pass the version worked out in conference before it could go to Trump to be signed into law.
Both the House and Senate measures would cut the corporate tax rate to 20 percent from 35 percent — though the Senate version would set that lower rate in 2019, a year later than the House bill would. Also, the Senate bill, unlike the House version, would provide only temporary tax relief to individuals, ending tax cuts for them in 2026. Both bills are expected to add more than $1.4 trillion to the federal deficit over 10 years, before accounting for any economic growth.
The House and Senate bills also align on the contentious issue of individual deductions for state and local taxes: They’d eliminate all but a deduction for property taxes, which would be capped at $10,000.
But they differ on the home mortgage-interest deduction; the House bill would restrict that break to loans of $500,000 or less with regard to new purchases of homes. The Senate legislation would leave the current $1 million cap in place.
They also differ, albeit narrowly, on the tax rates they’d apply to multinational companies’ accumulated offshore earnings. The House bill would tax those profits at 14 percent for earnings held as cash and 7 percent for less-liquid assets. The revised Senate bill contains a lengthy section that has no direct mention of the rates, but a person familiar with the Senate plan said they’d be 14.5 percent for cash and 7.5 percent for less-liquid assets.
Both bills share some key central elements: They both almost double the standard deduction for individual taxpayers while eliminating personal exemptions. They both allow companies to fully and immediately deduct the cost of their spending on equipment for five years. But the Senate version would slowly step down the expensing provision after the five-year period — a feature that the House bill doesn’t provide for.
Yet there are many differences, ranging from the taxation of business income to the amount set for the child tax credit.
The House bill would consolidate the current seven individual tax brackets to four, leaving the top tax rate at 39.6 percent. The Senate bill would have seven brackets, with lower rates, and a top rate of 38.5 percent.
The Senate bill includes a repeal of Obamacare’s mandate that most Americans have health insurance or pay a penalty. The House bill does not.
Senators approved a 23 percent tax deduction, subject to certain limitations, on business income earned from partnerships, limited liabilities and other so-called pass-through businesses. The House version would create a 25 percent tax rate for such business income, with restrictions on which businesses could qualify. Small businesses would get extra relief under the House legislation as well.
The House bill would also eliminate the estate tax, while the Senate version would limit the tax to fewer multimillion-dollar estates, but leave it in place. And after 2025, the limits would lift.
Under current law, the estate tax applies a 40 percent levy to estates worth more than $5.49 million for individuals and $10.98 million for married couples. The Senate bill would temporarily double the exemption thresholds. The House bill would double the exemption thresholds, and then repeal the tax entirely in 2025.
President Trump Tweeted his support after the Senate approval:
Donald J. Trump Verified account @realDonaldTrump :We are one step closer to delivering MASSIVE tax cuts for working families across America. Special thanks to @SenateMajLdr Mitch McConnell and Chairman @SenOrrinHatch for shepherding our bill through the Senate. Look forward to signing a final bill before Christmas!.
The Joint Committee on Taxation (JCT) later published its final analysis of the cost of the Senate GOP tax bill after the legislation had already passed the upper chamber.
The JCT posted its analysis of the Tax Cuts and Jobs Act on its official Twitter account at 2:56 a.m. on Saturday, an hour after the bill was voted on in the Senate.
Joint Committee estimates the revenue effects of a perfecting amendment to the “Tax Cuts and Jobs Act”, as reported by the Senate Committee on Finance — JCT Congress (@jctgov) December 2, 2017.
The analysis shows that the bill will cost $1.45 trillion over the next 10 years.