The Latest On The Senate Tax Bill vs. The House Version

Posted By on November 9, 2017

Confirming the leaks that occurred in the last hours, Senate Republicans just released their proposal for the tax bill and it is notably different from the House bill.

Here are the most notable highlights (more details below):

  • 20% permanent corporate tax cut delayed by 1 year
  • Complies with the $1.5 trillion cost (will cost $1.44 trillion)
  • Preserves 7 tax brackets: top tax bracket is 38.5%, down from 39.6%
  • Doubles standard deduction from $12,700 to $24,000 (married couples)
  • Ends state and local tax (SALT) deduction; keeps business deduction
  • Keeps the mortgage Interest deduction cap at $1 million
  • Preserve the estate tax, doubling the current $5.49 million exemption for individuals
  • Raises the child tax credit to $1,650 from $1,000
  • Sets 10% tax rate for US companies with IP in foreign low-tax jurisdictions
  • Full expensing of capital investments for five years
  • Preserves 401(k)s IRAs,
  • Sets repatriation rate at 12% for liquid assets, 5% for illiquid assets
  • Carried interest loophole unchanged
  • Electric Vehicle tax credit is spared (good news for Musk)

Tax Bill

Bloomberg details how the Senate proposal compares with the House version so far on some key areas, updated throughout the day:

 

INDIVIDUAL

Income Tax brackets

  • WHAT’S IN THE SENATE BILL: The Senate would include seven individual brackets of 10 percent, 12 percent, 22.5 percent, 25 percent, 32.5 percent, 35 percent and 38.5 percent. The last one would be a decrease from current law’s top individual rate of 39.6 percent. Thresholds for each bracket weren’t immediately available.
  • HOW THAT DIFFERS FROM THE HOUSE: The House would shrink the number of brackets to four with these thresholds for married taxpayers filing jointly: 12 percent: $24,000 to $90,000; 25 percent: $90,000 to $260,000; 35 percent: $260,000 to $1 million; 39.6 percent: $1 million and up. The thresholds would be adjusted for inflation based on chained CPI, a formula that would subject more income to higher tax rates than under the regular consumer price index.

State and Local Tax Deductions

  • SENATE BILL: Eliminates state and local tax deductions for individuals, according to Senator John Hoeven of North Dakota.
  • HOUSE BILL: The deduction for state and local income taxes or sales taxes would be repealed, while the deduction for state and local property taxes would be capped at $10,000.

Home-Mortgage Interest Deduction

  • SENATE BILL: Preserve the existing mortgage-interest deduction for home purchases with up to $1 million of debt.
  • HOUSE BILL: The home-mortgage interest deduction would be reduced for new purchases to $500,000 of debt from the current $1 million. The bill would also limit the deduction to one principal home, ending the break for second homes.

Standard Deduction

  • SENATE BILL: Roughly doubles the standard deduction to $12,000 for individuals and $24,000 for couples.
  • HOUSE BILL: Same.

Medical Expense Deduction

  • SENATE BILL: Preserve existing medical expense deduction and enhance the standard deduction for the blind and elderly.
  • HOUSE BILL: Repeal the medical expense deduction.

Child Tax Credit

  • SENATE BILL: Expand the credit to $1,650 from $1,000.
  • HOUSE BILL: Increase the credit to $1,600 per child younger than 17 — up from $1,000 — and includes an additional $300 credit for each parent as part of a consolidated family tax credit.

Estate Tax

  • SENATE BILL: Preserve the estate tax while doubling the current $5.49 million exemption for individuals.
  • HOUSE BILL: The estate tax would end after 2023. Before then, the current $5.49 million exemption for individuals would be doubled.

BUSINESS

Corporate Tax Cut

  • SENATE BILL: A corporate tax-rate cut to 20 percent would be delayed by one year to January 2019, according to GOP Senator Bill Cassidy of Louisiana.
  • HOUSE BILL: The corporate income tax rate would be a flat 20 percent starting in 2018.

* * *

The question now is whether the Senate bill will pass the House, and while there are some grumblings about the corporate tax cut delay (which will force companies to minimize 2018 profits and boost them in 2019), there may be just enough support for it to pass.

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