Senate Republicans unveiled details of their tax reform legislation in an outline released late on November 9. While there are some similarities to the House Ways and Means-approved tax reform bill, the SFC bill takes a different approach to tax reform.
Different Approach To Tax Reform
Most notably, the Senate proposal would delay the corporate tax rate cut to 20 percent until 2019 and offers seven rates on the individual side of taxation: 10, 12, 22.5, 25, 32.5, 35 and 38.5 percent. The House bill offers four individual rates, at 12, 25, 35 and 39.6 percent. Income thresholds for each bracket were not yet designated in the Senate’s proposal.
Additionally, the Senate bill would maintain the mortgage interest deduction cap at $1 million; the House proposes a cap of $500,000. Further, the Senate measure would completely eliminate the state and local tax (SALT) deduction. This proposal in the House’s bill has drawn criticism from both Democrats and Republicans hailing from high-tax states. And while the Senate bill retains the estate tax, unlike the House’s proposed phaseout of the tax, it doubles the threshold for qualifying estates.
ACA Individual Mandate Repeal
Reportedly, the House and Senate are both still discussing repealing the Patient Protection and Affordable Care Act’s (ACA’s) (P.L. 111-148) individual mandate. This move could general revenue to pay for proposed tax cuts. The Congressional Budget Office on November 8 reported that repealing the individual mandate would reduce coverage. However, it would also reduce federal deficits by over $300 billion between 2018 and 2027.
The Senate Finance Committee is expected to begin markup of its bill on November 13. Republicans hope to pass tax reform legislation before Thanksgiving.
By Jessica Jeane, Wolters Kluwer News Staff
Want to know more? Join Wolters Kluwer Principal Analyst Mark Luscombe on Nov. 29 for Tax Legislation Update: Tax Cuts and Jobs Act, a 2-CPE webinar from CCH® CPElink. Mark will present a complete discussion of the proposed legislation and its impact on taxpayers.