WASHINGTON (NBC) — The House passed a nearly $1.5 trillion tax bill on Thursday that would slash tax rates on corporations and private businesses, overhaul the individual tax code, and eliminate taxes on wealthy heirs.
The 227-205 vote on the “Tax Cuts and Jobs Act” is a victory for Speaker Paul Ryan, R-Wis., and for President Donald Trump, who spoke to Republican members ahead of the vote.
But the legislation still faces an uncertain future in the Senate, which is still trying to build consensus among members for its own tax bill, which contains significant differences. On Thursday, the Joint Committee on Taxation delivered the bill a blow with an analysis that predicted it would raise the average tax rate for Americans making under $75,000 by 2027.
Under the House legislation, the top corporate tax rate would be reduced from 35 percent to 20 percent and to 25 percent for certain pass-through businesses. The individual tax code would be reduced from seven brackets to four with a top rate of 39.6 percent. It would reduce and then end the estate tax, which currently applies to inheritances over $5.6 million for individuals.
Republicans hailed the bill’s passage, arguing it would simplify the tax code by eliminating various deductions, boost American companies competing overseas, and reduce taxes on middle income families.
“With this bill, we will deliver a new tax code built for a new era of American prosperity,” House Ways and Means Chairman Kevin Brady, R-Texas, said in a floor speech.
But Democrats, who unanimously voted against the legislation, pointed out that its gains would disproportionately benefit corporations and wealthy individuals, and that a minority of middle class families would see a tax increase. The Joint Committee on Taxation estimated Some of the bill’s tax cuts, like a $300 family credit, are temporary and it also uses an inflation rate that’s expected to gradually reduce benefits over time compared to current law.
The bill also weathered defections from 13 Republican members, primarily members from New Jersey, New York and California who fear that the bill’s provision to scale back the state and local tax deduction will hurt taxpayers in their states.
In the Senate, the JCT on Thursday estimated that their own bill would raise the average tax rate for those making $10,000 to $30,000 in 2021 and on all income groups making under $75,000 in 2027.
In a statement, the Senate Finance chairman, Sen. Orrin Hatch, R-Utah, did not dispute the results, but argued they were misleading because any tax increase would be “100 percent voluntary” due to the bill’s repeal of the Affordable Care Act’s individual mandate.
The latest Senate tax plan would eliminate the ACA’s penalty for going without insurance. If an individual wanted to take advantage of Obamacare’s tax credits, they’d still be able to under the Senate bill if they qualified and there was a participating insurer in their area. Hatch’s point is that those individuals would only face a tax hike if they chose not to collect the credits that would be available to them.
But the Congressional Budget Office estimates 13 million fewer people would go with coverage by 2027, mostly because healthier individuals would decide they didn’t need insurance. Premiums would also go up by 10 percent per year in response.
Because many of these uninsured would be eligible for federal subsidies to buy a private plan or for Medicaid, the government would spend $338 billion less on their health care, savings that Republicans plan to use to help finance their tax bill.
“Nothing in the mark will direct or suggest to taxpayers that they should not take advantage of the credits,” Hatch said.