WASHINGTON — Republicans introduced their finalized tax package Friday evening — which they say they’ll pass next week — with the promise that it will spark an economic boom by slashing corporate taxes, luring back profits parked overseas and lowering individual rates.
For individuals and married couples, the bill creates seven brackets including a zero rate at the bottom and a top rate of 37 percent, down from 39.6 percent, but the rates expire after 2025.
For corporations, the top rate drops to 21 percent from 35 percent next year, with a lower rate for liquid overseas profits brought back to the United States. The rates for pass-through entities, which include small businesses, also drop. The corporate and business rates are permanent.
The 1,097-page $1.5 trillion tax overhaul that merges the House and Senate bills appears headed for passage in votes Tuesday after Sen. Marco Rubio (R-Fla.) signed on after a last-minute child-tax credit expansion, and Sen. Bob Corker (R-Tenn.) flipped his no vote to yes.
“I think that we are going to be in a position to pass something as early as next week, which will be monumental,” President Donald Trump said Friday morning, ahead of the prospect of winning his first major legislative victory during this first year in office.
But Rep. Peter King (R-Seaford) and others from New York and other high-tax states said they still could not support a bill with a $10,000 cap on deductions for state and local property, sales and income taxes instead of the current fuller deductibility for those taxes.
“The bill is better now than when we started in September or October,” King said in a phone interview. “We made progress, but not enough for me to vote for it.”
As Republicans have worked over their tax package they have increasingly tilted its benefits to businesses and the wealthy, while making trade-offs to ensure the total cost of the bill does not add more than $1.5 trillion to the deficit over 10 years.
While it will take days, or longer, to understand all the details, a quick review of the bill reveals the broad outlines of the Republican revamp of the tax code.
The legislation creates seven brackets: 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent, and 37 percent.
In addition, the standard deduction would be nearly doubled to $12,000 for single filers, and $24,000 for a married couples.
The bill eliminates the personal exemptions and many deductions. But it preserves deductions for charity, for teachers for school supplies, medical expenses over 7.5 percent of adjusted gross income and interest for up to $750,000 for a new home mortgage.
The child tax credit, for each child, would double to $2,000 from $1,000, and the amount that could be refunded to families who owe little or no income tax would be $1,400.
The 529 savings accounts for college expenses would be expanded to cover costs for elementary and secondary schools. And it continues to exempt from taxes the value of reduced tuition for graduate students.
The corporate alternative minimum tax is eliminated. The bill also retains the estate tax, but doubles the exempt amount to $10 million.
State and local taxes could be fully deducted by corporations but homeowners would be limited to the $10,000 cap.
For pass-through entities, the bill sets a 20 percent tax deduction for the first $315,000 of joint income earned by all businesses organized as S corporations, partnerships, LLCs, and sole proprietorships.
For small businesses with income above this level, the bill generally provides a deduction for up to 20 percent on business profits for an effective marginal tax rate to no more than 29.6 percent.
$10,000 cap on state, local deduction is in final tax billCongressional Republicans are racing to get the legislation ready for a vote next week. More details are expected to be released Friday.
The bill also effectively ends the Obamacare mandate to obtain health insurance and allows drilling in a portion of the Arctic National Wildlife Refuge. A Senate parliamentarian ruled out a measure to allow nonprofit charities to engage in politics.
Republicans plan to hold a vote Tuesday in the House first, followed by the Senate.
Sen. Ron Wyden (D-Ore.), the top Democrat on the Finance Committee, sharply criticized Republicans for writing the legislation without bipartisan support.
“This whole process has been a sham,” Wyden said on MSNBC Friday. “The fact is this is a historically unpopular giveaway to the multinational corporations at the expense of the middle class.”
Rep. Kevin Brady (R-Tex.), chairman of the tax-writing House Ways and Means Committee, said, “This delivers middle class tax relief. And for many families in America, working and blue collar families, will see a tax reduction between $1,200 and $2,000.”
Brady predicted Congress would enact the bill next week. The House passed its tax bill with nine votes to spare, but the Senate barely approved its version in a 51-49 vote.
Yet potential hurdles remain in the Senate. Sen. Susan Collins (R-Me.) remains undecided. And Sen. John McCain (R-Ariz.), hospitalized for side effects to cancer treatment, and ailing Sen. Thad Cochran (R-Miss.) could be absent for the votes.
With solid opposition of the 48-member Democratic caucus, the Senate Republicans can afford to lose the votes of only two of their 52 members and still pass the legislation with a tie-breaking vote from Vice President Mike Pence — who postponed a Mideast trip just in case.