WASHINGTON—As a House committee put finishing touches on its tax bill Thursday without any support from Democrats, Senate Republican leaders introduced a plan of their own and significant differences in the two versions may create hurdles for Republicans’ hopes to pass a tax overhaul before the end of the year.
The House Ways and Means Committee voted along party lines to approve a plan at a cost of $1.44 trillion over 10 years. Under the terms of the budget resolution, the bill can cost no more than $1.5 trillion in order to qualify for a simple majority in the Senate to pass the bill. Otherwise, Senate Republicans, who hold a 52-48 majority, would need 60 votes to block an inevitable Democratic filibuster.
According to a data from the Joint Committee on Taxation, the Senate plan would cost $1.495 trillion, also shy of the budget threshold.
“With this measure, a family of four will see its taxes go down by nearly $1,500,” said Senate Finance Committee Chairman Orrin Hatch, R-Utah, of the 253-page proposal introduced Thursday afternoon.
The House and the Senate tax plans differ on deal-breaking issues. Notably, the Senate bill calls for an overall elimination of the state and local tax deduction, which Republicans say has disproportionality benefited residents in Democratic-leaning states.
While there are no Senate Republicans from high-tax states like New York, New Jersey and California, blue state Republicans in the House are wary of eliminating the state tax deduction that would cost their constituents and might cost the congressmen their seats in the 2018 midterm elections.
The Senate proposal would expand individual tax brackets from the four proposed by the House to seven, ranging from 10 percent to a top 38.5 percent. Revenue generators include imposing taxes on domestic earnings from foreign companies and overseas earnings on intellectual property.
House Ways and Means Committee Chairman Kevin Brady, R-Texas, added a tax increase on money transferred in from foreign accounts to the House proposal to help offset the cost of other benefits included in the plan, like the restoration of the adoption credit, benefits for Americans with disabilities, and a moving expense deduction for military families.
The amendment also included a 9 percent “pass-through” tax rate for businesses’ first $75,000 of income. The National Federation of Independent Business said on Thursday that Brady’s amendment, which passed along party lines, would create “substantial tax relief for millions of small business owners who were left out of the original bill.”
The addition was added in as a response to criticism from small business owners that the 25 percent pass-through rate only benefitted entities earning more than $200,000.
The Senate plan also would restore the adoption tax credit as well, but also incorporates a deduction for medical expenses and “education relief” for graduate students.
Hatch said his committee will start its work on the bill Monday, while the House is expected to vote on its version next week.