Senate Republicans released a tax plan Thursday distinct from the House plan in that it delays the corporate tax cut until 2019, but would slightly cut the top individual rate and keeps the status quo in the number of brackets.
The Senate Finance Committee proposal goes a step further than the House plan, released a week earlier, by eliminating altogether the deduction individuals can take for state and local taxes. The House Ways and Means Committee plan eliminated state and local income tax deductions, but still allowed property tax deductions of up to $10,000.
“We have the opportunity to make a real difference in so many lives across our country, whether it’s the worker, the small business, the company.” – @SenCapito #TaxReform pic.twitter.com/5N3fNFyvNP
— Senate Republicans (@SenateGOP) November 9, 2017
Declining wages and keeping business in the United States are key benefits of the plan, said Senate Finance Committee Chairman Orrin Hatch, R-Utah, during a Senate floor speech Thursday.
“We’ve been working for years to address these issues and to meet the needs of the 21st century global economy. Fortunately, we now find ourselves in a position to make good on all these years of hard work,” Hatch said.
“We have been focused this year on providing middle-class tax relief, reforming the business tax system, and fixing our obscenely outdated international tax regime,” Hatch continued. “The mark we’re releasing today will accomplish all of these goals and more. It will reduce individual rates across the board and direct substantial relief to low- and middle-income families and workers. It will bring down corporate tax rates, a goal once shared by Republicans and Democrats.”
Doing away with this exemption is reportedly expected to raise about $1 trillion in revenue, to help offset some of the other tax cuts. Conservatives have argued that the deduction forces low-tax states to subsidize high-tax states such as California, New York, and Illinois.
Some Senate tweaks might have been needed, as GOP Sens. Bob Corker of Tennessee, Jeff Flake of Arizona, and James Lankford of Oklahoma said they won’t support a tax plan that adds too much to the debt, creating a bloc of votes that would be able to kill the bill if they aren’t appeased.
Many of the changes are positive, said Adam Michel, a tax policy analyst for The Heritage Foundation.
“A full [state and local tax deduction] repeal is a good step in the right direction,” Michel told The Daily Signal. “On the corporate side, as long as it’s paired with full expensing, a delay is not the end of the world as long as the rate is permanent.”
Meanwhile, Senate Minority Leader Chuck Schumer, D-N.Y., seems poised to oppose the proposal.
Still reading the details but based on what we’ve seen so far of the Senate GOP tax bill, it’s clear that this is another tax giveaway to the rich & big corps & its coming squarely on the backs of those in the middle class.
— Chuck Schumer (@SenSchumer) November 9, 2017
The Senate and House would have to settle the differences between the bills in a conference committee.
The House released a plan last week that would immediately cut the corporate tax rate—currently the highest in the world—from 35 percent to 20 percent. The Senate bill phases that in over one year.
Meanwhile, the House Republicans, and President Donald Trump, strongly favor simplifying the code in part by creating fewer brackets. The House bill specifically reduced the number of brackets from seven to four. But the Senate would keep seven brackets in place.
The House plan keeps the top marginal rate at 39.6 percent for high earners. However the Senate bill delivers a small cut, reducing the rate to 38.5 percent.
The Senate plan maintains the mortgage interest deduction capped at $1 million, a departure from the House bill that reduced the cap to homes of less than $500,000.
“We plan for lower rates, as you’ve heard we increased the standard deduction, we expand the child tax credit, and we reformed the tax code so that we give Americans access to more jobs and higher wages,” Senate Majority Whip John Cornyn, R-Texas, said on the Senate floor Thursday after the release of the plan.
“If what we want is better paying jobs, and we do, then we have to focus on lowering rates on all the job creators, including small businesses,” Cornyn added.
“The framework we developed is designed to cut taxes for middle-class families, not millionaires. It’s to help small businesses grow and create more jobs. It’s to provide relief for hardworking families by increasing the standard deduction.”