House Republicans passed a landmark bill this week to cut corporate and individual taxes in an effort not seen since 1986. The bill, The Tax Cuts and Jobs Act (H.R. 1), passed the full House of Representatives on Thursday afternoon by a vote of 227 to 205.
The House plan would permanently cut the corporate tax rate to 20 percent from 35 percent and make other tweaks to the tax code aiming to make businesses more competitive at home and abroad. Over the last decade, a significant number American corporations have moved business overseas due to the high corporate taxes in the U.S. Now they would get to bring the money home at a tax rate of 12 percent. Additionally, the House plan would reduce individual tax brackets to four from seven and make changes to several tax breaks. Among them, the bill would limit state and local deductions and the mortgage interest deduction, eliminate the personal exemption and nearly double the standard deduction.
Individual tax brackets in the House plan:
Single Filers –
- 12%, $0 to $45,000
- 25%, $45,001 to $200,000
- 35%, $200,001 to $500,000
- 39.6% $500,000 or more
Married Taxpayers Filing Jointly-
- 12%, $0 to $90,000
- 25%, $90,001 to $260,000
- 35%, $260,001 to $1,000,000
- 39.6% $1,000,001 or more
House Ways and Means Committee Chairman Kevin Brady (R-TX) projects “This bill creates 81,108 new jobs in Texas alone and increases the annual income by $2,558 for median households in Texas.”
The move represents a crucial step forward in congressional efforts to enact the centerpiece of President Trump’s economic agenda.
The party’s tax plan, however, faces an uncertain future in the Senate, where Republican leaders are working with a slimmer majority than in the House.
After four days of debate, the Senate Finance Committee voted 14 to 12 along party lines to approve their version of the tax package late Thursday evening. The approval helps clear the way for the full Senate to consider the bill after Thanksgiving, although it remains to be seen whether it has the support to pass the chamber.
Some Republicans have expressed reservations about the Senate plan, which would permanently reduce the corporate tax rate but allow cuts for households and individuals to expire after 10 years. The plan would also repeal the Affordable Care Act’s individual mandate to buy health insurance, a difference from the House plan that gives Senate leaders over $300 billion in additional revenue to work with, but would undermine a system aimed at providing health coverage to millions of Americans.
President Trump has long been adamant that tax reform be enacted in 2017, and with Congress’ actions this week, Treasury Secretary Mnuchin confirmed Friday morning that they are now on pace to have a package signed before Christmas.
