Pres. Trump eager to sign major overhaul of U.S. tax code that reduces corporate income tax
Republicans in the Senate on Tuesday, November 28, made a significant move in furthering the passage of the major tax overhaul, a key platform for Republicans this year.
Along with some senators, the Senate Budget Committee voted (along party lines) to pass the Republicans’ $1.5 trillion tax package on Tuesday. Previously, the bill’s passage seemed uncertain, but due to some last-minute deals, the bill was able to garner support from some Republicans on the Hill who had previously expressed concern over the bill, particularly its effect on small businesses and the overall deficit.
On November 16, the House had approved a rewrite of the original bill, called House Tax Cuts and Jobs Act, and is looking for approval in the Senate this week. If passed in the Senate, both the House and the Senate will have to consolidate on a version that will pass both chambers, likely giving Republicans their first legislative victory in the Trump administration.
“I think we’re going to get it passed,” Trump said on Tuesday. ‘It’s going to have lots of adjustments before it ends, but the end result will be very, very massive — the largest in the history of our country — tax cut.”
Despite previous Republican opposition from Senators Susan Collins of Maine, Bob Corker of Tennessee and Ron Johnson of Wisconsin, the three key senators expressed positivity about the bill after Republican leadership promised their concerns would be addressed.
Corker, who has warned that any legislation that increases federal debt would be “the greatest threat to our nation,” voted to advance the bill to the Senate floor based on a “trigger” mechanism (of which details have not been released) that would raise taxes if the U.S. economy does not generate as much revenue as expected from the tax overhaul.
“I think all of us want to get across the finish line, and we are trying to make this bill one that not only serves our immediate interests as a nation but also our long-term interests,” Corker said on “Fox & Friends” on Tuesday. “Everybody is working feverishly right now to try to get to that place.”
How do the House and Senate bills differ?
After the House bill approved its rewrite of the original Tax Cuts and Jobs Act, Senate Republicans this week are looking to approve its version for a vote slated this week.
Per the GOP’s goal to favor the middle class, both plans lower the individual income tax rate for the middle class. Both, however, utilize a slower-paced inflation measure which would cause income tax brackets to grow more slowly as well; this would result in pushing more taxpayers into higher tax brackets. Both would also decrease the tax rate for corporations from 35 percent to 20 percent.
The House bill would call for a condensed bracket system from the current seven-bracket system into four (previously three before the rewrite). It would also get rid of many itemized deductions (e.g. state and local taxes, medical expenses, etc.) to make room for higher standard deductions.
In accordance to Senate rules, the Senate bill eliminates the individual tax provisions that help the middle class, including the child tax credit and lower tax rates at each income bracket, as a way to avoid driving up the deficit.
In comparison, the House bill would increase the deficit by $1.08 trillion in the next decade; the Senate bill would only drive it up by half, according to conservative-leaning think tank Tax Foundation.
How would the tax bill affect the middle class?
For years, Republican lawmakers have held that strengthening the country’s middle class as a priority. When the GOP House bill was first introduced earlier this year, House Speaker Paul Ryan and other key congressional Republicans marketed it as a saving grace for middle-class Americans.
The current version of the tax bill being debated on the Senate floor this week would affect nearly all Americans.
In general, the bill would affect families very differently depending on children. Depending on income, married couples without children would see far fewer tax cuts than those with children. Moreover, about 70 percent of these couples that take the standard deduction would see a doubling of the standard deduction but would see the elimination of the personal exemption.
Meanwhile, the lowest income-earners would benefit from the doubling of the standard deduction and the expansion of the child tax credit, which was saved by a handful of Republicans as well as Trump’s daughter Ivanka.
All in all, the nonpartisan Urban Institute-Brookings Institution’s Tax Policy Center stated that through the House bill, in 2018, those that belong on the lowest 20 percent of the income spectrum would see an average tax cut of $60. The next 20 percent would receive an average cut of $310 and the next would see an average savings of $830.
In ten years, these income groups would see lower and lower tax cuts. These cuts generally mirror the ones detailed in the Senate bill.
The Senate is currently reviewing the bill with a vote scheduled later in the week. (Klarize Medenilla/AJPress)