Senate Advances Tax Legislation

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Senate Advances Tax Legislation

 

At 2 a.m. on Saturday morning, the Senate voted 51-49 in favor of legislation that would reshape the nation’s tax code. The Republicans who supported this bill say that it will provide much-needed tax relief for families and boost the economy. Democrats contend that it is a giveaway to the rich that will dramatically increase the deficit.

 

Here are some of the major provisions in this tax bill:

  • Retains the current seven tax brackets, but reduces the top marginal rate to 38.5% and cuts rates in other brackets
  • The standard deduction increases to $12,000 from $6,500 for single filers, $18,000 from $9,500 for heads of households, and $24,000 from $12,500 for joint filers
  • Increases the child tax credit to $2,000 from $1,000
  • The phase-out for the child tax credit starts at $500,000 (compared to $110,000 today)
  • Lowers the corporate income tax rate to 20% from 35% starting in 2019
  • Creates a higher exemption for the corporate minimum tax
  • Exempts $11.2 million from the estate tax, up from $5.6 million now
  • Repeals the individual health insurance mandate under the Affordable Care Act, or Obamacare

 

The individual income tax changes are set to expire in 2025. This was done to give the bill a more favorable budget score, which helps ease passage. Some observers expect that these provisions of the bill would be made permanent in the future, since members of Congress will be hesitant to allow (in effect) a tax increase to tax place upon their expiration. However, there is no guarantee that this will occur.

 

All Senate Democrats opposed it. Every Senate Republican except Bob Corker of Tennessee supported it.

 

The Senate bill differs in some key respects from the House tax cut legislation. These differences must be resolved in a conference committee, then the same bill must be passed by both house of Congress and signed by the president. Given the commitment by Republicans in both branches, this process should proceed fairly quickly. It is also possible that the House of Representatives could pass the Senate version of the bill. Whatever happens, it is likely that President Trump will have tax legislation on his desk to sign before the end of the year.

 

Do you support the tax cuts in the Senate bill? Or do you think that this legislation is the wrong way to reform the tax code?

 

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