House Republicans unveiled their bill to overhaul the U.S. tax code Thursday morning.
We’ll follow along with the news and analysis of the bill all day. Refresh this page for the latest updates.
Here are the highlights:
- The House bill reportedly will permanently and immediately cut the corporate tax rate from 35 percent to 20 percent. Lawmakers dropped earlier plans to phase-in the tax cut over a number of years or have the cut sunset in the future, both measures aimed at reducing–on paper, at least–their impact on long-term budget deficits.
- The pass-through rate will be 25 percent, a huge cut for many small-businesses organized as sole-proprietorships and partnerships.
- As first reported by Breitbart in August, the bill will impose a one-time tax on corporate profits that have been accumulated and held abroad. By taxing these profits at 12 percent on a one-time basis, the bill eliminates the incentive for corporations to continue to avoid repatriating the funds and investing them in America or distributing them to shareholders. Illiquid corporate assets will be taxed at a lower rate of 5 percent.
- The risky plan to change the way Americans save for retirement, and possibly raise taxes on middle-income Americans, has been dropped. The bill will not change 401(k)s, according to talking points distributed by the House GOP leadership.
- The bill is named the Tax Cuts and Jobs Act, breaking with recent Washington precedent of giving bills titles with acronyms that indicate the goals of the legislation.
- The bill cuts the current seven individual tax brackets down to four: 12 percent, 25 percent, 35 percent, and 39.6%. Originally, the GOP framework planned to drop the 39.6 percent rate. It was preserved in an effort to prevent tax burden from shifting to lower income taxpayers.
- A big question has been where the new brackets would break. Now we know. For individuals, the 25 percent rate starts at $45,000, the 35 percent rate at $200,000, and the 39.6 percent rate at $500,000. For married couples filing together, the 25 percent rate will start at $90,000, the 35 percent rate at $260,000, and the 39.6 percent rate at $1 million.
- Standard deduction rises to $12,000 from $6,350 for individuals, and from $12,700 to $24,000 for married couples.
- The House bill expands the child tax credit from $1,000 to $1,600, which is a smaller expansion than conservative lawmakers in the Senate had pushed for.
- The threshold for the death tax will double from its current $5.6 million per person and $11.2 million per married couple. It would be ended altogether in 2024.
- Corporate interest deductions get capped at 30 percent of earnings before interest, taxes, depreciation, and amortization. Small businesses and real estate firms, which are often highly leveraged, are exempt from the cap.
2:43 P.M. Next stop: markup city and the lobbyist feeding frenzy.
So what happens next?
The House Ways and Means Committee announced Thursday that it will begin consideration of the tax bill at noon on Monday, November 6.
This will not be a hearing, which would bring in witnesses that would testify and answer questions to lawmakers. Instead, it will be what is known as a “markup session.” Lawmakers on the committee will get an explanation of the bill from committee staff and then have the opportunity to propose amendments and make statements. The process is expected to take several days.
This is the time when lobbyists will work overtime to preserve their favored tax breaks. The real estate lobby, in particular, will work to undo the changes to the mortgage interest deduction.
2:04 P.M. Freedom Caucus Chair Rep. Mark Meadows says today is “a good day for the American people.”
Today is a good day for the American people–#TaxRefom is headed in the right direction. Time to finish the job and get our economy going.
— Mark Meadows (@RepMarkMeadows) November 2, 2017
1:45 P.M. Goodbye private-activity bonds.
The bill ends a deduction for interest income from private activity bonds, a program that allows businesses to issue bonds that mimic the tax-exemption of municipal bonds when they finance public works-type projects, such as highways and airports. The Joint Committee on Taxation estimates that the end of the private activity bond tax-exemption will increase revenue by about $39 billion over the next decade.
This could be one of the provisions that gets challenged in later versions of the tax bill. It would make infrastructure projects undertaken by the private sector more expensive, which may conflict with Trump’s plans to improve American infrastructure through public-private partnerships.
According to Bloomberg, there were about $20 billion of private activity bonds issued last year.
There may be a side benefit for state and local governments. By limiting the amount of tax-exempt bonds, the change could increase demand for more traditional muni-bonds. That would make borrowing less costly for state and local governments.
1:28 P.M. CEOs and corporate fat cats get hit with a double-whammy
Businesses will lose the ability to deduct executive compensation above $1 milliion under the bill. Currently, this is still allowed for “performance-based” compensation.
Another hit to fat cat corporate lifestyles: the end of the deduction for entertainment expenses of businesses.
But don’t worry, Mr. CEO. No need to cancel your lunch reservation at Nobu. You can still deduct expenses for meals.
1:12 P.M. Statement from Tea Party Patriots Citizens Fund praises House bill bu stops short of an endorsement, says it looks forward to “making our voices heard.”
Tea Party Patriots Citizens Fund Chairman Jenny Beth Martin released the following statement today, reacting to the tax plan released by the House Ways and Means Committee.
“Tea Party Patriots Citizens Fund and our network of grassroots activists thank President Trump for recognizing the importance of reforming our tax code to provide desperately needed tax relief for American families, make our businesses more competitive, strengthen our economy and simplify our needlessly complex tax code. Today, House Republicans have released a bill that aims to fundamentally reform our tax code in order to reach the goal of a simpler, flatter and fairer tax system for all Americans. Working with our Tax Reform Coalition partners FreedomWorks and activists dedicated to passing meaningful tax reform, we look forward to making our voices heard and helping Congress work to pass a sweeping reform that meets the goals set by President Trump. We encourage everyone who wants a simpler, flatter and fairer tax system to join our coalition by visiting www.taxreformcoalition.com and signing our pledge.”
12:59 P.M. Bond market signals no worries about larger deficits
One of the biggest concerns raised by critics of the GOP tax plan is that it would drive up budget deficits. By cutting corporate taxes and individual rates, the bill could cost the government billions in revenue.
The bond market’s reaction so far: so what?
Higher debt levels have the potential to create higher inflation. If investors think inflation is going higher, the price of long-term government bonds should fall and bond yields rise. Instead, U.S. Treasury yields declined this morning. In other words, investors are willing to pay more for government bonds this morning.
This could indicate a belief that higher levels of economic growth will make up for revenue losses from tax cuts or a belief that additional debt will not be inflationary. Either way, it should be a sobering moment for deficit hawks.
Of course, it likely will not stop deficit-worriers from complaining about “fiscal irresponsibility” but it does make their arguments far less plausible.
12:39 P.M. Bill Kills Electric-Car Tax Credit
The House bill would end a $7,5000 credit for purchases of electric cars. Tesla shares declined sharply after Bloomberg first reported on the elimination of the credit.
12:37 P.M. Senator Marco Rubio is not satisfied with the tax bill’s expansion of the child tax credit.
— Marco Rubio (@marcorubio) November 2, 2017
12:29 P.M. Senator Toomey says it is a great bill.
Sen. Pat Toomey (R-PA) said in a statement, “Republicans in the House have written a great tax reform bill that will put more money in the pockets of hardworking, middle-income Pennsylvanians and will produce a healthier, stronger economy. I applaud the leadership of Speaker Ryan and Chairman Brady for their work and believe the House should pass this measure.
Toomey added, “Meanwhile, my Senate Finance Committee colleagues and I are working diligently to finalize our own comprehensive tax plan. The shared goal of Congressional Republicans and the administration on tax reform remains the same: delivering a direct pay raise to hardworking American families and creating incentives for economic growth with new, well-paying jobs.”
12:19 P.M. Small-Business lobby group says it is not supporting the tax bill.
The National Federation of Indepdent Business, a major lobbying organization for small business, has issued a statement saying it is “unable to support” the House tax bill. It says it will work with lawmakers to “make the necessary corrections.”
“The National Federation of Independent Business is unable to support the House tax reform plan in its current form. We will work with Chairman Brady to make the necessary corrections so that the benefits of tax reform extend to all small businesses.
“This bill leaves too many small businesses behind. We are concerned that the pass-through provision does not help most small businesses. Small business is the engine of the economy. We believe that tax reform should provide substantial relief to all small businesses, so they can reinvest their money, grow, and create jobs.”
So what’s the problem? The House bill provides a 25 percent rate for pass-through businesses. But it places limits on who can take advantage of that rate, excluding many professional service businesses such as accounting and law firms. That seems to be the sticking point.
12:15 P.M. Trump praises the House bill, warns of distortions by special interests and unfair reports from media.
The White House released this statement from President Donald Trump:
“I applaud the House Ways and Means Committee for introducing the Tax Cuts and Jobs Act, which is another important step toward providing massive tax relief for the American people. My tax reform priorities have been the same since day one: bringing tax cuts for hardworking, middle-income Americans; eliminating unfair loopholes and deductions; and slashing business taxes so employers can create jobs, raise wages, and dominate their competition around the world. The policies of my Administration have already helped to drive the stock market to all-time highs and the unemployment rate to a 16-year low. Economic confidence is skyrocketing and our GDP grew 3 percent yet again this quarter.
We are just getting started, and there is much work left to do. The special interests will distort the facts, the lobbyists will try to save their special deals, and some in the media will unfairly report on our efforts. But my Administration will work tirelessly to make good on our promise to the working people who built our Nation and deliver historic tax cuts and reforms — the rocket fuel our economy needs to soar higher than ever before.”
12:08 P.M. Republican House leadership is very happy with their tax bill.
House Speaker Paul Ryan and Ways and Means chairman Kevin Brady praised the bill.
“This tax plan is for all those middle-class families who deserve a break. It is for all the families that are living paycheck to paycheck who just keep getting squeezed,” Ryan said. “With this tax plan the typical family of four will save $1,182 a year on their taxes. For families have that extra $1,182 will make a real difference.”
“This is our chance to deliver the most transformative tax cuts in a generation,” Brady (R-Tx) said. ““Let’s not let the Washington special interest, the TV pundits, or the pessimists fool you. None of them thought we’d get this far with tax reform and they’re wrong. Now, working with President Trump, our colleagues in the House and the Senate, and the American people, we’re going to prove them once and for all wrong by getting pro-growth tax reform to the president’s desk this year.”
“We are getting rid of loopholes for special interests and levelling the playing field. We are making things so simple that you that you can file your taxes on a piece of paper the size of a postcard,” Ryan said.
Other members of the GOP leadership also praised the bill.
House Budget Committee Chairwoman Diane Black (R-TN) said, “We are going to make the economy boom.”
“I think you’re going to hear businesses say that they want to come back to America,” said House Majority Leader Kevin McCarthy (R-CA).
11:48 A.M. Protection for churches from the IRS.
The bill includes a provision that would protect churches from the risk of losing their tax-exempt status for commenting on political affairs in the “ordinary course” of the church’s business. Under current law, many churches worried that they risked losing the exemption for exercising free speech from the pulpit. Conservatives have sought to protect churches from this risk for years and Donald Trump promised to enact the protection on the campaign trail in 2016.
This means that churches will be able endorse or oppose political candidates, something prohibited by existing law. An important caveat: spending on political speech is strictly limited to “de minimus” amounts. So don’t expect to see churches taking out big television ad buys endorsing candidates. As intended, this will just remove the risk that a church could get dinged by the IRS because its pastor urges parishoners to vote for a certain candidate.
The bill also extends more leeway for free speech from hospitals and universities.
11:43 A.M. The actual text of the 429-page‘‘Tax Cuts and Jobs Act’’ is here.
11:39 A.M. Here is the section by section commentary from Ways and Means Committee chairman Kevin Brady on the tax reform bill.
11:20 A.M. Big Sports takes a hit in the tax bill. Tax-exempt bonds can no longer be used to build professional sports stadiums under bill.
11:11 A.M. Bloomberg’s Josh Green points out that home builder stocks are getting hurt by the reduced cap on mortgage interest deductions.
Home builders getting crushed by House GOP tax bill: pic.twitter.com/kvWFYI2smh
— Joshua Green (@JoshuaGreen) November 2, 2017
11:08 A.M. As expected, the Alternative Minimum Tax will be repealed. This was a parallel tax that disallowed personal exemptions and deductions. Originally aimed at making sure the wealthiest taxpayers could not avoid taxes altogether through deductions, the tax was not indexed for inflation so that it was hitting many middle-income Americans.
10:56 A.M. FreedomWorks President Adam Brandon released the following statement regarding House Republicans’ tax plan.
“After more than 30 years, we have a generational opportunity to fundamentally reform America’s tax code. We applaud Chairman Brady for his years of hard work on this crucial effort. The Tax Cuts and Jobs Act is a pro-growth tax reform bill that will boost the middle class, increase workers’ take home pay, and create jobs for Americans. We are committed to getting this bill across the finish line this year. Failure is not an option for us and our grassroots community. We need to boost the economy and get our country back to annual growth above 3 percent.
FreedomWorks is mobilizing our activists across the country to let our elected officials in the House and Senate know we support the plan. Getting this bill signed by the end of 2017 is our top priority.”
10:53 A.M. Is your college a hedge fund in disguise? A handful of very large universities have huge endowments that produce huge financial gains that are protected from taxation under current law. The Republican bill would create a new excise tax on private universities with assets exceeding $100,000 per student. That still seems like a huge tax loophole for the biggest university endowments.
10:46 A.M. In exchange for the higher standard deductions and in an effort to simplify the tax code, Republicans plan to eliminate a lot of tax breaks. Each of these has its supporters who will try to preserve them as the bill moves through the legislative process. Here is a partial list of tax breaks that are capped or eliminated by the bill.
- The deduction for state and local taxes is capped at $10,000 and limited to property taxes. That benefits residents of Texas and other states that depend on property taxes rather than income and sales taxes.
- Tax credit for adoption is ended.
- Deduction for student loan interest is repealed.
- Tax credit for employer provided child-care is repealed.
10:38 A.M. While we wait for the actual bill, we’ll note there are no changes to the charitable giving deduction. Still, the larger standard deduction could make itemizing less attractive for many taxpayers, which would make the charity deduction less relevant. Charities had pushed for changes to keep the deduction relevant for a larger set of taxpayers.
10:29 A.M. We saved the 401(k)! The bill “makes no changes to the popular retirement savings options that Americans have today — including 401(k)’s and Individual Retirement Accounts, or I.R.A.s. Americans will be able to continuing making both traditional, pretax contributions and ‘Roth’ contributions in the way that works best for them,” according to talking points distributed by GOP leadership on Thursday.
10:15 A.M. The bill includes limits on the home mortgage-interest deduction, sure to spark resistance from the real estate and mortgage banking industries. While existing mortgages are grandfathered in for loans up to $1 million, for new home purchase mortgages the cap falls to $500,000.
9:50 A.M. Here’s what we wrote last night about what to expect from the tax bill.