Republicans unveiled their final tax bill Friday evening, a step that will place them on track to vote on their plan next week and potentially have President Donald Trump sign it into law by the end of the year.
It’s a campaign promise that Republicans are optimistic they’ll finally be able to deliver on, bolstered in part by several key senators saying they’ll back the bill Friday before the bill’s public release.
“I’m confident we’ll have the votes,” said Sen. Rob Portman, a Republican from Ohio and a member of the tax conference.
What’s in the bill
The bill — which critics say is heavily weighted to ease the tax burden of businesses rather than the middle class — drops the corporate tax rate down from 35% to 21%, repeals the corporate alternative minimum tax, nearly doubles the standard deduction for individuals and restructures the way pass-through businesses are taxed.
The bill keeps seven personal income tax brackets, and lowers that tax rates for most brackets, including dropping the top rate to 37% from 39.6%.
The child tax credit under the bill will be $2,000 and the credit is refundable up to $1,400. After months of negotiations in both chambers, a narrow vote in the US Senate and this last-minute tweak to the child tax credit aimed to win back the support of Florida Sen. Marco Rubio, Republicans were upbeat Friday afternoon as they briefed reporters on where the bill stood.
While Republican leaders released a two-page summary of the bill’s contents, the summary did not include specific details on how the plan is funded.
The conference report will also allow individuals to deduct up to $10,000 in state and local taxes. Individuals can either elect to deduct up to $10,000 in state and local income and property taxes or state and local property and sales taxes. Originally, Republicans had tried to repeal the state and local deductions altogether, but pushback in the House and Senate forced leaders to retain the property tax deduction. Then, the conference report went even further and made concessions in order to win over Republicans in the House from high-tax states like New Jersey, New York and California.
Unlike previous versions of the bill, the conference committee version leaves the student loan interest deduction untouched.
The bill lowers the mortgage interest deduction cap. For those who take out a new mortgage on a first or second home, they will only be allowed to deduct the interest on debt up to $750,000 for a primary residence, down from $1 million currently. Homeowners who already have a mortgage would be unaffected by the change.
Rather than repealing the estate tax, which the House bill originally had done, the latest version of the bill follows the Senate model and doubles the estate tax exemption meaning that fewer Americans will have to pay it.
The bill also repeals the corporate alternative minimum tax, which had been left in the Senate bill, but had led to outcry from business groups.
On the individual alternative minimum tax, the final bill doubles the exemption for individuals who make up to $500,000 and married couples who make up to $1 million.
Key Republican votes line up behind the plan
Republican leaders repeatedly said Friday that they were convinced they had enough support to pass their legislation next week.
“I’m confident at the end of the day, the Senate will approve this conference committee report,” House Ways and Means Chairman Rep. Kevin Brady said.
The bill appeared to be gathering momentum Friday, as key holdouts in the Senate — where Republicans have a slim two-vote majority — signaled their support for the bill, some more directly than others.
After the plan’s release, Sen. Susan Collins of Maine, who has thus far been undecided, released a positive statement that held back from explicitly saying she’d vote for the bill.
“Americans deserve a tax system that is fair, simple, and promotes economic growth,” Collins said. “I am pleased that the final tax reform bill includes all three of the amendments I authored, along with a number of provisions for which I strongly advocated, that will benefit lower- and middle-income families.”
In addition, Sen. Bob Corker, who initially voted against the GOP tax plan when it first past the Senate, said Friday afternoon he would support the plan.
Just hours before the bill was released, Rubio tweeted that he was happy with the direction the bill settled in, and a source close to Rubio told CNN that the eleventh-hour high-wire act had worked and Rubio was planning to support the bill.
“For far too long, Washington has ignored and left behind the American working class. Increasing the refundability of the Child Tax Credit from 55% to 70% is a solid step toward broader reforms which are both Pro-Growth and Pro-Worker,” Rubio tweeted.
What does the bill cost?
One of the key items Republicans have had to keep a close eye on is how much their bill costs. Under the Senate rules, the bill cannot cost more than $1.5 trillion over 10 years and it cannot add to the deficit after that.
But, many of the newest provisions in the tax bill are expensive. Expanding the child tax credit, for example, wasn’t cheap.
So how does the new bill pay for things like the child tax credit or lowering the top rate? One of the ways was the bill lowered how much pass-through businesses could deduct from their taxable income. It was 23% in the Senate bill, but now it’s 20%. The bill increased the tax rate for businesses that want to bring back money from overseas to 8 percent for illiquid assets and 15.5% liquid assets. The final agreement also raises approximately $100 billion through increasing the corporate tax rate from 20% to 21%.
The bill sunsets the individual tax breaks at the end of 2025 and Republicans also repealed the individual mandate — a key part of the Affordable Care Act — to help finance the bill.
