All eyes on the Senate now.
The GOP-controlled House passed a tax bill that eliminates many popular deductions, but reduces the tax brackets to three instead of seven and doubles standard deductions.
It passed 227-205. However, 13 Republicans voted against the bill and no Democrats voted for it. This could spell gloom for it in the Senate, which the GOP holds a two seat majority.
From The Wall Street Journal:
The bill would repeal the alternative minimum tax, increase the child tax credit, abolish the estate tax by 2025 and transform the U.S. system for taxing multinational corporations. The plan would raise taxes on some people by removing personal exemptions and deductions for state and local income taxes, medical expenses and student loan interest. On the whole, the bill would reduce federal taxes by $1.4 trillion over the next decade.
“We are in a generational defining moment for our country,” Mr. Ryan said on the House floor before the vote, declaring that the bill would lead to faster economic growth and higher wages. “It is finally time that we get the general interest of this country to prevail over the special interests in Washington.”
It also lowers the corporate tax rate to 20% from 35%.
The Joint Committee on Taxation claimed that the House tax bill will provide “tax cuts for every income group in 2019.” The committee also said that around “8% of households would pay more in 2019 and that proportion would rise over time.”
The Republicans who voted against the bill come from high taxed states: New York, New Jersey, and California. They do not approve of eliminating the state and local tax deduction. But maybe they should take that up with their state legislators?
Rep. Pete King (R-NY) lashed out against the bill, which he described as “an unforced error” and worries it may harm the GOP in the 2018 midterms.
That point along with the Senate’s bill eliminating the property tax deduction may cause problems in the upper chamber. However, the Republicans do not have senators from those states.
So the House passed its tax bill. The Senate is still working on one and hope to finish it by the end of the week. If the Finance Committee accomplishes that then the Senate hopes to bring it to the floor after Thanksgiving.
If the Senate passes its bill, then the two chambers will have to reconcile.
Considering how well the two Obamacare repeals went in the Senate, it’s easy to believe that tax reform will fail as well. Despite the fact that the Senate does not have GOP senators from those high taxed states, one senator has already come out against the bill: Sen Ron Johnson (R-WI).
That means the senate Republicans can only lose two more votes. If they lose one more then Vice President Mike Pence can cast his tie-breaking vote.
The Senate version will include language to repeal Obamacare’s individual mandate. Sen. Rand Paul (R-KY) pushed for that inclusion and he is one who voted against the Obamacare repeal bills. It’s safe to assume he will be a yes on this bill. But that move might scare off others who voted against Obamacare repeals like Sen. Susan Collins (R-ME) and Sen. John McCain (R-AZ).
Another reason why the senate bill may not pass? The tax cuts on individuals will expire after 2025. In other words, it’s all temporary. The corporate tax rate will permanently be 20%, though.