WASHINGTON—House and Senate Republicans are on track to get a tax bill to the White House before Christmas, possibly as soon as Dec. 15, the holiday recess, but they still must resolve key differences between their two plans – especially the Senate’s elimination of the Obamacare individual health care mandate and the House’s reduction in the number of tax brackets.
On Monday, the House voted 222-192 to send its bill to a conference committee with the Senate, where representatives from each chamber formulate one cohesive measure capable of passing both chambers of Congress without change. The Senate is expected to follow suit, and the selection of committee members is expected later this week.
Before debate and inevitable compromises begin, we’ve put together a chart of some of the key differences between the House and Senate versions.
| House Plan | Senate Plan | What the GOP says | What’s not being said | |
| Individual income tax brackets | Consolidates the current individual income tax brackets from seven to four, with the top bracket at 39.6 percent. | Continues the seven-bracket system with slightly lower rates than before, with the top income bracket at a peak 38.5 percent.
|
White House Budget Director Mick Mulvaney: “We favor whatever can pass. The number of rates doesn’t really change the simplicity of the code for ordinary folks,” he said. | In the House plan, there is an additional “bubble rate” above the top 39.6 percent that would apply for high earners. |
| Individual mandate under the Affordable Care Act | No change. | Repealed. | House Ways and Means Chairman Kevin Brady: “Yeah, I believe we will,” when asked if the provision to repeal the mandate would be included in a final bill. | The Congressional Budget Office review of the Senate tax plan found that 13 million people would be without health insurance by 2027. |
| Standard deduction | The standard deduction increases to $12,200 for individuals and $24,400 for joint filers. | A slightly smaller increase to $12,000 for individuals and $24,000 for joint filers. | House Speaker Paul Ryan: “When you close the loopholes, more income is subject to taxation, which allows you to lower tax rates on that income.” | The Senate plan calls for all individual provisions to expire by 2025. |
| Child tax
credit |
The credit jumps to $2,000 in House plan. | An increase to $1,600 from current the current $1,000. | First daughter Ivanka Trump: “As wages have stagnated the costs of raising a family have grown, exponentially,” referring to the credit. | The credit increase could reduce taxes, but would not be a refund. |
| Mortgage interest deduction | The deduction is limited to the first $500,000 of mortgage debt, lowered from the current $1 million. | Eliminates the deduction in regard to equity. Otherwise, it keeps it as is.
|
House Ways and Means Chairman Kevin Brady: “All mortgages today remain as they are going forward.” | The National Association of Realtors estimates that more than 32 million Americans claim the deduction. |
| Alternative minimum taxes (AMT) | Repealed. | Raises the tax exemption for individuals by roughly 40 percent. | House Majority Leader Kevin McCarthy: “I think [the corporate alternative minimum tax] has to be eliminated because that would destroy [research & development.]” | The AMT ensures both corporations and individuals do not use legal breaks to avoid all taxes by calculating what they owe under both tax systems and pay the higher tax. |
| Graduate student tuition waivers | Tuition waivers would now qualify as taxable income. | No change. | House Ways and Means Chairman Kevin Brady: “Outside of the university world, there is some controversy to the current tax provisions.” | National Association of Graduate-Professional Students: “The implementation of taxes on tuition waivers would create a cycle for graduate students where they are forced to take out loans to pay their tax bills.” |
| Student loan interest deduction | The deduction is eliminated in the House plan. | Keeps the deduction in place. | Not much. | The deduction is available to any taxpayer paying interest on student loan debt, allowing them to deduct up to $2,500 annually. |
| Teachers’ supplies for students | Eliminates the deduction. | Doubles current $250 amount to $500. | Rep. Bill Pascrell, D-N.J.: “The plan clearly chooses corporate CEOs and hedge fund managers over teachers and police officers.” | This summer in Oklahoma, a third-grade teacher panhandled for money for school supplies. She made $52 in 10 minutes. |
| Non-child dependents. | Creates a $300 credit for parents of non-child dependents. | $500 credit for non-child dependents. | House Speaker Paul Ryan: “The average tax cut for a middle-class family is going to be $1,182.” | The provision expires in 2022. |
| Medical expense deduction | Repeals the deduction. | Keeps deduction in place and lowers the eligible rate of expenses that qualify from 10 percent to 7.5 percent of adjusted gross income. | Republicans say only 8.8 million of 150 million taxpayers used the deduction in 2016, and a higher standard deduction would benefit middle-income families more. | AARP Executive Vice President Nancy LeaMond: “The House tax bill repeals the medical expense deduction, resulting in a health tax for taxpayers who get sick or have chronic conditions.” |
| Corporate tax rate | Lowered to 20 percent. | Lowered to 20 percent. | President Donald Trump: “It could be 22 when it comes out but it could also be 20. We’ll see what ultimately comes out.” | The House implements the reduced rate in 2018, while the Senate delays it until tax year 2019. |
| Estate tax | Immediate increase in tax exemption to $10 million, then repealed after six years. | Doubles the exemption $11 million, keeps tax in place. | Sen. Chuck Grassley, R-Iowa: “I think not having the estate tax recognizes the people that are investing as opposed to those that are just spending every darn penny they have, whether it’s on booze or women or movies.”
|
House Minority Leader Nancy Pelosi: “Cutting the top tax bracket for the richest and the $270 billion giveaway of repealing the estate tax reveal a GOP tax framework built for billionaires.” |
Some similarities in the bills will make for easy negotiations. The full expensing of short-lived capital investment—think machinery, supplies, equipment, etc.—is incorporated into both plans, with some differences. Repatriation (sending foreign profits back to the U.S.) in the House plan would be taxed at 14 percent for liquid assets and 7 percent for non-liquid assets. In the Senate, it is slightly higher at 14.49 percent and 7.49 percent, respectively.
The state and local tax deduction was originally repealed in the Senate plan, but a last-minute change on before a vote on Friday adjusted the provision in the bill to match that of the House’s.
The House and Senate have eight days left in in the 2017 session to pass the bill.