Video courtesy: NBC News
WASHINGTON (AP) – Republicans early Saturday rammed a nearly $1.5 trillion tax overhaul through the Senate, a sweeping revamp of the nation’s tax code. The House passed a nearly $1.5 trillion tax bill two weeks ago that differs in key respects. The GOP will work quickly to iron out the differences with the goal of delivering final legislation to President Donald Trump by Christmas.
A comparison of the two Republican-written measures:
– Personal income tax rates: Senate bill retains the current number of brackets, seven, but changes them to 10, 12, 22, 24, 32, 35 and 38.5 percent. Under current law, the top bracket for wealthiest earners is 39.6 percent. The House measure condenses seven brackets to four: 12, 25, 35 and 39.6 percent. Under the Senate bill, the reductions in personal income tax rates are temporary, ending in 2026. They’re permanent in the House bill.
– Standard deduction: Used by about 70 percent of U.S. taxpayers, currently $6,350 for individuals and $12,700 for married couples. Senate, House bills both double those levels to $12,000 for individuals and $24,000 for couples.
– Personal exemption: Both bills eliminate the current $4,050 personal exemption.
– State and local taxes: Senate, House bills end federal deductions for state and local income and sales taxes, but they allow the deduction for up to $10,000 in property taxes.
– Tax credits: Senate doubles per-child tax credit to $2,000. House raises per-child tax credit from $1,000 to $1,600, extends it to families earning up to $230,000. Creates a $300 tax credit for each adult in a family, which expires in 2023. Both bills preserve the adoption tax credit.
– Home mortgage interest deduction: Senate retains the current limit for the deduction to interest paid on the first $1 million of the loan. House reduces the limit to $500,000, for new home purchases.
– Other deductions: Senate bill preserves deduction for medical expenses not covered by insurance but ends deductions for moving expenses and tax preparation. House eliminates medical expense deduction.
– Individual insurance mandate: Senate bill repeals the requirement in Democrat Barack Obama’s health care law that people pay a tax penalty if they don’t purchase health insurance. House bill does not.
– Alternative minimum tax: The AMT is aimed at ensuring that higher-earning people pay at least some tax. Senate bill doesn’t repeal it but reduces the number of people who have to pay it. House measure repeals the tax.
– Inheritance tax: Currently, when someone dies the estate owes taxes on the value of assets transferred to heirs above $5.5 million for individuals, $11 million for couples. Senate bill doubles those limits but does not repeal the tax. House initially doubles the limits and then repeals the entire tax after 2023.
– Corporate taxes: Senate, House bills both cut current 35 percent rate to 20 percent, but Senate has one-year delay in dropping the rate.
– Pass-through businesses: Millions of U.S. businesses “pass through” their income to individuals, who then pay personal income tax on those earnings, not corporate tax. Senate bill lets people deduct 23 percent of the earnings and then pay at their personal income tax rate on the remainder. House measure taxes many of the pass-through businesses at 25 percent, plus creates a 9 percent rate for the first $75,000 in earnings for some smaller pass-throughs.
– Businesses: Senate, House bills both expand write-offs allowed for companies that buy equipment.
– Multinational corporations: Senate, House bills impose a one-time tax on profits that U.S.-based corporations are holding overseas. Senate bill also ends tax advantages for firms moving overseas, and requires corporations to continue paying the business version of the alternative minimum tax. House measure seeks to eliminate tax incentives that encourage some U.S. companies to move overseas.