The House is scheduled to vote on the federal tax reform package today, with a Senate vote expected either later today or tomorrow. The bill is expected to pass largely on party lines.
Following are some basic highlights from the bill:
- Reduces the corporate tax rate from 35 percent to 21 percent
- Lowers individual tax rates, while adjusting the tax brackets
- Doubles the standard deduction used by about two-thirds of U.S. households, to $24,000 for married couples
- The $1,000-per-child tax credit doubles to $2,000, with up to $1,400 available in IRS refunds for families who owe little or no taxes.
- Repeals the Obamacare mandate that everyone carry health insurance or face a penalty
- Retains the charitable contribution deduction, and limits the mortgage interest deduction to the first $750,000 in principal value. Limits the state and local tax deduction to a combined $10,000 for income, sales, and property taxes.
A more detail analysis of the bill’s details can be found at the Tax Foundation website.
One criticism of the tax bill is that the individual income tax rate cuts will expire after ten years. That provision is included, however, due to Senate rules stating that legislation can be passed with a simple majority only if it doesn’t drive up the deficit 10 years after passage. Republican leaders have declared that their desire is for the income tax cuts to be made permanent in the future.
Another downside is that the tax cuts are not accompanied at this time by any planned spending cuts – with estimates projecting an increase to the national debt of nearly $1.5 trillion over a decade. The negative consequences from failing to rein in spending will offset much of the benefit from the tax cuts.