Tax Reform Expected to Pass in the House This Week
The GOP Tax reform legislation is expected to pass through the House by Thursday. Republicans seem to have come up with a compromise, which means that Speaker Paul Ryan may actually reach his ambitious timeline of passing the bill before Thanksgiving.
There has been tremendous pressure for Republicans to pass the bill after the ObamaCare repeal was unsuccessful.
“I do believe that the momentum continues to move us forward,” said Rep. Mark Walker (R-N.C.) “It will be difficult for members who voted against ObamaCare repeal to go 0-for-2 on their campaign promises. I’d look for a huge vote.”
But, most Republicans anticipate that the bill will pass.
“In the end, I think what you’re going to see is the House pass a bill,” said Steve Scalise (R-La.,) House Majority Whip on Sunday on Fox & Friends.
An amendment introduced on Thursday has strengthened the House bill and its support.
“The amendment created a new 9 percent tax rate for some small-business income — earning the support of the National Federation of Independent Business, which panned the initial House bill. It also restored the adoption tax credit, a top priority for conservatives,” writes The Hill.
It’s predicted that 225 to 230 Republicans will vote to pass the House tax bill, which is more than the 218 needed.
So, what are the changes Republicans are introducing in the bills to the U.S. tax system?
First, the tax-cut bill revealed on Thursday would streamline tax filing, making file returns much simpler and smaller.
“The GOP plans would repeal the alternative minimum tax, a parallel tax system affecting more than four million households. The House bill would consolidate a tangle of tax breaks for higher education. Both plans would remove—temporarily—thorny depreciation rules. Narrow deductions for tax-preparation fees, teachers’ out-of-pocket expenses and moving costs would vanish under the House plan, removing lines from tax forms and pages from Internal Revenue Service publications,” writes the Wall Street Journal.
“It gets rid of several things which add a lot of complexity for a lot of ordinary taxpayers,” said Lawrence Zelenak, a Duke University law professor.
Although the plan would limit certain tax breaks.
“Despite the larger standard deduction, the repeal of the personal exemptions means the amount of income that is tax free wouldn’t be close to doubled. Instead, fewer people would itemize deductions because fewer would exceed the standard deduction,” writes the Wall Street Journal. “That is a backdoor way of limiting tax breaks for mortgage interest and charitable contributions, and it’s why many home builders, real-estate agents and charities oppose the GOP plans.”
The current medical-expense and student loan interest deductions would disappear under this bill.
Although this bill is expected to pass in the House, the similar Senate bill complicates things further. The Senate plan retains deductions from student-loan interest, medical-expenses, and property taxes.
“Among the biggest differences in the two bills that have emerged: the House bill allows homeowners to deduct up to $10,000 in property taxes while the Senate proposal unveiled by GOP leaders last week eliminates the entire deduction,” writes Newsmax. “The deduction is particularly important to residents in states with high property values or tax rates, such as New Jersey, Illinois, California and New York. Rep. Kevin Brady, chairman of the House Ways and Means Committee, said that he worked with lawmakers in those states to ensure the House bill “delivers this relief” and that he was committed to ensuring it stays in the final package.”
However, both versions would eliminate deductions for state and local income taxes and paid sales taxes.
Democrats argue that both plans would evidently make the middle-class pay higher federal income taxes.
“The House’s so-called ‘compromise’ would be saying to the middle class we’ll only chop off four of your fingers instead of all five,” said Sen. Chuck Schumer (D-NY.)
Rep. Kevin Brady, the House’s top tax-code writer, disagreed with Schumer’s statements.
“Here is where I strongly disagree,” said Brady on Fox News Sunday. “I believe there is tax relief all up and down the income level for families, regardless of what they earn.”
His statements come after the New York Times reported that one-third of middle-class families would see a tax increase under the plan.
“They’re describing an America that doesn’t exist — one where the economy never grows and one where your paycheck stays stagnant no matter what happens,” said Brady referring to The Times article. “I strongly disagree.”
Brady also pointed out that the plan would increase paychecks, therefore stimulate economic growth.
“It’s important to make sure people keep more of what they earn, even in these high-tax states,” said Brady.
But, he also said he won’t accept that Senate plan if it eliminates the property tax deduction.
Both bills reduce the corporate tax rate from 35 percent to 20 percent, but the Senate version delays this massive cut by one year.
Both Ryan and Treasury Secretary Steven Mnuchin believe the House and Senate can iron out the differences by December.
“The House will pass its bill, the Senate will pass its bill, and then we will get together and reconcile the differences, which is the legislative process,” said Ryan, who promised to further negotiate a compromise.
“The good news is, both the House and the Senate and the administration have the same objectives,” said Mnuchin on CNN’s State of the Union. “And that’s about middle-income tax relief. That’s about fixing the business tax system, so that we’re competitive.”