WASHINGTON, D.C. – U.S. House of Representatives Republicans unveiled legislation on Thursday to deliver tax cuts that President Donald Trump has promised, filling Tuesday television and social media with analysts examine the impact of the proposal.
The 429-page bill, representing what would be the largest overhaul of the U.S. tax system in thirty years. It calls for slashing the corporate tax rate to 20 percent from 35 percent, cutting tax rates on individuals and families and ending certain tax breaks for companies and individuals. N.C.’s Republicans on Capitol Hill responded with support.
“I want to spur higher wages and more job opportunities, I want to lower the tax burden on working families, and I want to bring jobs back to America,” said Rep. Richard Hudson (R-N.C.). “I look forward to further reviewing the Tax Cuts and Jobs Act and continuing to work to reform our nation’s tax code to help improve people’s lives.”
Congressional passage of this legislation that would affect nearly every U.S. company and family was far from certain, and opponents quickly came out against it. However criticism of the bill was quickly called into question by the Washington Post when Democrats started using the same claim that “The average tax increase on families nationwide earning up to $86,100 would be $794.00”
The Post gave the claim “four Pinocchios” because, according to their research, the data apparently came from a talking points document produced by the Democratic Policy and Communications Committee, which develops messaging for the Senate Democrats. Their talking points for Democrats pulled from a report from the Joint Economic Committee that said the original framework of the proposal, released in September, would mean that “8 million households that earn up to $86,100 with an average tax increase of $794.” The Washington Post reran the numbers and contact the sources and found that 97 million (80 percent) of households in the bottom three quintiles of income will receive a tax cut. They reported an average tax cut of about $450 for those 97 million households under the proposal.
However Twitter posts making the claim remained online as of press time.
Certain provisions within the tax package will test Republicans, who control the White House and both chambers of Congress, but were unable to deliver the much-promised “repeal and replace” of Obamacare.
A number of provisions in the legislation, called the Tax Cuts and Jobs Act, would hit harder those in Democratic-leaning states, particularly ones higher personal and corporate taxes. The measure contains rollbacks in deductions for state and local taxes and cuts in half mortgage interest deductions for new mortgages more than $500,000.
The proposal also brings the U.S. corporate tax in line with Europe and other nations at 20 percent, phases out the estate tax or “death tax” and eliminates the alternative minimum tax. Europe currently has a 25 percent corporate tax, compared to the U.S. 38.91 percent. The U.S. is currently listed as the fourth highest statutory corporate tax rate in the world, according to the Tax Foundation.
“This is a very important and special moment for our country, for all Americans. Are we going to let the defenders of the status quo win and see our country continue down this downward spiral?” Republican House Speaker Paul Ryan asked, despite data showing about eight straight years of economic growth.
Meeting with Ryan and other key House Republicans, Trump told the lawmakers he was counting on them to maintain the momentum for tax cuts, and repeated his request that Congress send him the legislation to sign into law by the U.S. Thanksgiving holiday on Nov. 23.
That is an ambitious timetable for such a long, multi-faceted piece of legislation that will face a ferocious battle amid fierce opposition from many Democrats.
Trump called the bill an “important step” toward tax relief for Americans, adding in a statement, “We are just getting started, and there is much work left to do.”
The bill presented by the tax-writing House Ways and Means Committee would consolidate the current number of tax brackets to four from seven: 12 percent, 25 percent, 35 percent and 39.6 percent. An earlier Republican tax outline had called for cutting the top rate for the highest earners to 35 percent.
The National Association of Home Builders blasted the legislation, saying the changes to larger mortgage deductions would damage home prices and punish homeowners in urban areas.
“We’re concerned if enacted, this bill will throw us back into another housing recession,” Jerry Howard, the group’s president, said in an interview.
The group said the provision in the bill capping the interest deduction for future home purchases at $500,000 – half the current amount – was unacceptable. Howard said 7 million homes are currently above $500,000 and in high-cost regions like Washington, D.C., New York City, California and Hawaii, the impact would be felt the most.
The bill would repeal the existing deduction for state and local income and sales taxes, and would cap the deduction for state and local property taxes at $10,000. Those provisions would most affect Americans in higher-tax states such as California, New York, New Jersey, Pennsylvania and Illinois.
The National Federation of Independent Business, the influential small business lobby, also came out against the bill, while the U.S. Chamber of Commerce business lobby backed it.
Ryan said the typical family of four would save $1,182 annually on taxes under the bill. here are some other key points presented by the bill’s sponsors.
- doubles the standard deduction for individuals and families, from $6,350 to $12,000 for individuals and $12,700 to $24,000 for married couples.
- allows small businesses to write off loan interest.
- caps the maximum tax rate on small businesses and other non-corporate enterprises at 25 percent, down from 39.6 percent – the lowest on small business since World War II
- repeals a personal exemption of $4,050 that taxpayers can currently claim for themselves, their spouse and any dependents.
- phase out tax-exempt financing for sports stadiums
- subject large private universities to 1.4-percent excise tax on investment income
- repeals, the Johnson Amendment, a long standing prohibition on 501C3s from endorsing or opposing political candidates
- create a new Family Tax Credit, including expansion of the Child Tax Credit from $1,000 to $1,600 and provides a credit of $300 for each parent and non-child dependent
- double exemptions for estate taxes on inherited assets and phases out the estate tax over six years
- makes no changes to the tax-deferred 401(k) retirement savings program.
- creates a new 10-percent tax on U.S. companies’ high-profit foreign subsidiaries, calculated on a global basis, in a move to prevent companies from moving profits overseas.
- Foreign businesses operating in the United States would face a tax of up to 20 percent on payments they make overseas from their American operations.
U.S. equities have rallied in 2017 to a series of record highs, partly on expectations of deep corporate tax cuts. Shares of U.S. luxury homebuilders fell after the bill was released. As investors parsed its provisions, the Dow Jones Industrial Average was up modestly and the S&P 500 was down slightly.
Investors cautioned the tax plan was preliminary and it was too soon to gauge the effect on specific industries.
The Ways and Means Committee will begin formal consideration of the bill next week before the full House can vote on it. It also must pass the Senate, where Republicans hold a 52-48 majority.
