By: Christina Fulponi, Government Affairs Coordinator
On December 2, 2017, the Senate passed a Tax Cuts and Jobs Act with a vote of 51-49, which updates the tax codes and cuts taxes for individuals and businesses. While the legislation would add $1 trillion to the deficit, according to the Joint Committee on Taxation (JTC), the plan would level out in 2027 with modest gains and significant savings in federal spending. In mid-November, the House passed their version of the bill, which differs slightly from the Senate’s more recent bill. Both bills repeal the state and local tax deduction (SALT) for income and sales taxes and nearly double the standard deduction for both single and married couples.
Additionally, both bills:
- eliminate personal exemptions and expand the medical expense deduction;
- preserve the estate tax, but double the exemption levels;
- propose to cut the corporate tax rate from 20% to 35%, which would not take effect until 2019 under the Senate proposal; and
- would also implement a territorial system for how multinational companies are taxed, a move which is intended to even the playing field for American international businesses which are said to be at a disadvantage under current tax code.
However, aside from these similarities, there are a few notable differences between the bills.
For starters, the Senate bill maintains seven individual income tax brackets but changes the rates, while the House bill only proposes four brackets. Regarding Obamacare taxes, the Senate proposed legislation would repeal individual mandates while the House bill proposed no changes. The House bill would also repeal deductions for medical expenses and student loan interest, as well as repeals or reduces credit card reductions. Conversely, the Senate bill has made very few changes to any of those provisions.
Pennsylvania’s Senators voted along their party lines, with Senator Toomey voting in favor and Senator Bob Casey Jr. opposing it. Senator Bob Corker of Tennessee was the only Republican to vote against the bill. So, what happens next? Both bills will head to a conference committee where the differences will be resolved, with a goal of a compromise reaching the President’s desk by early 2018.
