Republicans late Friday unveiled their final plan to overhaul the tax code, a sweeping measure that aims to lower taxes on businesses and individuals, open up parts of Alaska to oil drilling and roll back a key piece of the 2010 health care law.
The massive measure is likely to pass both chambers early next week. Momentum for the landmark package grew throughout the day Friday, capped off with a surprise announcement from Sen. Bob Corker, R-Tenn., that he would back the final bill after opposing a previous version.
Enactment of the conference report would be a signature achievement for President Donald Trump and congressional Republicans, marking the first major rewrite of the tax code since 1986 and the first major legislative win for the GOP in the 115th Congress.
The compromise bill would cut the corporate tax rate to 21 percent beginning in 2018, down from the current 35 percent rate. Individual tax rates would be reduced to 10, 12, 22, 24, 32, 35 and 37 percent, but the plan notably does not reduce the number of brackets — a goal many Republicans had at the outset of the process.
The top individual rate would apply to single filers making more than $500,000 and joint filers making more than $600,000.
The repeal of the individual mandate in the 2010 health care law would not kick in until 2019 under the plan, aides said. The mandate requires most Americans to obtain health insurance and the tax bill would remove the penalty for not purchasing coverage.
The alternative minimum tax for corporations would be fully repealed, while the individual AMT would be maintained with broader exemptions.
The final bill also includes a 20 percent deduction for taxes on “pass-through” business income, paid by owners on their individual returns, that would apply to the first $315,000 of joint income.
A $10,000 deduction for state and local property taxes and income or sales taxes is also included. That change will likely help assuage concerns from Republican lawmakers from high-tax states like California, New Jersey and New York that their constituents would be adversely affected by changes to what's known as the SALT deduction.
On mortgage interest, the current deduction is preserved but only for mortgages of up to $750,000 for new purchases and refinancings, a midrange point between the House and Senate bills. The final version also preserves the deduction for mortgage interest paid on second homes, but it eliminates the deductibility of home equity debt.
Repatriation tax rates on foreign holdings would be 8 percent for non-cash assets and 15.5 percent for cash, slightly higher than what was proposed in the House and Senate bills.
On the individual side, the standard deduction would roughly double to $12,000 for individuals and $24,000 for married couples. The child tax credit would be expanded to $2,000, with up to $1,400 refundable, phasing out for families making over $400,000.
The bill requires taxpayers claiming the child tax credit to show a Social Security number for each child, a provision that would affect undocumented immigrants who now use individual Tax Identification Numbers to claim the credit.
For individuals and married couples filing jointly, the tax rates and income thresholds are:
- 10 percent for individuals making less than $9,525 per year and married joint filers making less than $19,050
- 12 percent for individuals making up to $38,700 per year and married joint filers making up to $77,400
- 22 percent for individuals making up to $82,500 per year and married joint filers making up to $165,000
- 24 percent for individuals making up to $157,500 per year and married joint filers making up to $315,000
- 32 percent for individuals making up to $200,000 per year and married joint filers making up to $400,000
- 35 percent for individuals making up to $500,000 per year and married joint filers making up to $600,000
- 37 percent for individuals making more than $500,000 per year and married joint filers making more than $600,000
The adoption tax credit and child and dependent care credit would be preserved in the final version. For graduate students, the exemption for the value of reduced tuition would be continued, and the current deduction for student loan interest payments would also be preserved.
The estate tax would be maintained but the exemption threshold would be doubled.
Many of the individual tax breaks would expire after eight years, in line with the Senate-passed bill.
Those expirations were needed in the Senate bill to keep the 10-year cost of the package under $1.5 trillion, the cap set by a budget framework both chambers adopted at the start of the tax process. According to the Joint Committee on Taxation, the final bill clocks in at $1.46 trillion over a decade.
Ways and Means Chairman Kevin Brady, R-Texas, said the final bill represented a “mix between the House and Senate” plans. He said Americans will begin to reap the benefits of tax relief early in 2018, and noted that the upcoming filing season would be “the last time you will file under this monstrous, broken tax code.”
Brady also said it’s likely that subsequent fixes would be needed later as flaws in the overhaul arise.
Democrats, who have taken to calling the bill a “tax scam,” again said the package a massive giveaway to corporations and wealthy individuals.
“This tax bill is a moral and economic obscenity,” said Sen. Bernie Sanders, I-Vt., ranking member of the Budget Committee.
House Democrats also warned Republican leaders that they should not assume Democratic support for waiving certain mandatory spending cuts that would kick in without congressional action because of the tax bill’s projected deficit impact.
House Majority Leader Kevin McCarthy, R-Calif., said the House would vote on the tax bill Tuesday, as they race to send it to Trump’s desk before Christmas.
Camila DeChalus contributed to this report.