House Approves Tax Reform 2.0 Bill to Extend Individual, Small Business Tax Cuts

The House has approved a tax bill that would make permanent tax reform’s individual and small business tax cuts enacted last December. The controversial bill is part of Republican’s three-bill “Tax Reform 2.0” package, two of which cleared the House on September 27.

The Tax Reform 2.0 package was approved by the House Way and Means Committee on September 13.  The following three House-approved bills make up the 2.0 package, which now heads to the Senate:

– Protecting Family and Small Business Tax Cuts Bill of 2018 (HR 6760);

– Family Savings Bill of 2018 (HR 6757); and

– American Innovation Bill of 2018 (HR 6756).

Democratic Support

The House approved HR 6760 on September 28 by a 220-to-191 vote. The bill would make permanent certain individual and small business tax cuts enacted under the Tax Cuts and Jobs Act (TCJA) (P.L. 115-97).

Although the TCJA did not receive one Democratic vote, HR 6760, which extends many of the TCJA’s individual provisions, received three Democratic votes. Ten Republicans voted against the bill, all of whom hail from high-tax states and oppose the $10,000 annual cap on the state and local tax (SALT) deduction.

HR 6760 would make permanent certain TCJA individual tax cuts that are set to expire after 2025. These TCJA provisions were made temporary to comply with certain Senate budget rules applicable to the reconciliation process requiring only a simply GOP majority for approval. Notably, these provisions include, among others, lower individual tax rates, larger standard deduction, the SALT deduction cap, and the 20 percent deduction of business income for certain passthrough entities.

Over 40 Democrats voted for HR 6757 and HR 6756, which focus on enhancing savings accounts and start-up business tax breaks. All three bills are now headed to the Senate, where the package is not expected to be considered before midterm elections in November. Additionally, the entire package is not expected to be approved by the Senate. However, it is considered likely on Capitol Hill that HR 6757, which promotes retirement and family savings, could be approved by the Senate in the lame-duck session.

“It’s encouraging to receive 44 Democratic votes in support of elements of Tax Reform 2.0,” House Ways and Means Committee Chairman Kevin Brady, R-Tex., said in a September 28 statement. “I’m confident that working with the Senate we can advance bipartisan bills to the President’s desk,” he added.

Democratic Criticism

Although the Tax Reform 2.0 package did receive some Democratic support in the House, Democrats in both the House and Senate remain largely opposed to Republican efforts to extend the TCJA’s individual and small business tax cuts. Many Democrats have criticized the TCJA for primarily benefiting wealthy individuals and corporations.

“The Republicans’ tax 2.0 legislation is another reckless tax cut for the wealthy that leaves behind average, hardworking families,” Ways and Means Committee ranking member, Richard Neal, D-Mass., said on the House floor just prior to the HR 6760 vote. “In less than a year, House Republicans have handed out trillions of tax cuts for the wealthy and big corporations,” Neal added in a September 28 statement released after the 2.0 package cleared the chamber.

Meanwhile, House Speaker Paul Ryan, R-Wis., praised the Tax Reform 2.0 package for propelling economic growth and helping middle income taxpayers. “On top of making lower rates for individuals and small businesses permanent, these bills create new savings options for families to plan for education and retirement,” Ryan said in a September 28 statement.

Looking Ahead

House lawmakers left Washington, D.C. on September 28 to begin campaigning ahead of midterm elections in November. The Senate is not expected to take up the Tax Reform 2.0 package, if at all, until later this fall.

As for whether any of the three bills will become law this year, Brady remains optimistic. “We had 41 Democratic votes in support of retirement savings and that innovation for start-ups. I think that has a very good chance, with bipartisan support of getting to the President’s desk this year,” Brady said in a September 28 televised interview. “The [individual tax cuts] permanency bill, that’s separate, will go to the Senate after today. [Senate Majority] Leader Mitch McConnell, has made it clear – when he sees a path for 60 votes, he’ll bring it forward.”

By Jessica Jeane, Senior News Editor

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