House and Senate Republicans Reach Accord on Tax Plan

By:
Chris Gaetano
Published Date:
Dec 13, 2017
Congress

Republicans in the House and Senate have come to a tentative deal on the tax reform bill, with leadership saying a final vote could come as soon as Monday, according to the New York Times. The final deal would slash the corporate tax rate from 35 to 21 percent, versus the 20 percent the bills originally aimed for, and the new rate would be effective January 2018 (the Senate bill wanted it to be effective in 2019). It also eliminates the corporate AMT entirely, which had been inserted at the last minute by the Senate in order to meet procedural requirements. Corporate entities complained that retaining the corporate AMT defeated the purpose of the numerous other tax cuts that they would enjoy, said the Times. 

In terms of individuals, the top rate would be reduced from 39.6 percent to 37 percent, which would apply to a wider pool of people than initially envisioned (House and Senate Republicans initially wanted only those making $1 million or more to be subject to the top rate). In a nod to Republicans in states like California and New Jersey, the compromise bill also expanded the $10,000 deduction for state and local taxes, now allowing it to be split between property tax and income or sales tax. It would also keep the individual AMT, but would apply to fewer people than before. 

The Senate's tax deduction for pass-through entities would be retained, though it would probably be lower than initial 23 percent target, though the bill would also include a House provision allowing high-capital low-employee pass-through entities to bypass limits on how much income qualifies as for a preferential deduction, according to the Times. The conference bill would also largely retain the Senate approach to taxing multinational companies.

The nonpartisan Joint Committee on Taxation and Congressional Budget Office have both said wealthier taxpayers would gain disproportionately from the Republican proposals, according to Reuters, though Republicans have disputed this analysis, most recently in the one-page document released by the Treasury Department

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