The House of Representative approved a $1.4 trillion tax cut package on Thursday, putting President Trump and the Republican Party one step closer to their promised tax code overhaul. If it passes the Senate, it will be the biggest change to the US tax code since 1986.
The bill would reduce the number of tax brackets from seven to four and slash the corporate tax rate from 35% to 20%. It would nearly double the standard deduction, helping out most taxpayers, and increase the per-child tax credit.
“Passing this bill is the single biggest thing we can do to grow the economy, to restore opportunity, to help these middle-class families that are struggling,” said House Speaker Paul Ryan.
The tax package eliminates:
• The alternative minimum tax
• The estate tax
• Deductions for state and local income taxes
• Personal exemptions for student loan interest
• Personal exemptions for medical expenses
Democrats criticize the bill as a ‘giveaway’ to corporations and wealthy individuals and argue that the elimination of popular deductions could lead to tax hikes for millions of Americans.
House Minority Leader Nancy Pelosi called it a “GOP tax scam” and argued that the outcome of the vote would “decide the future of the American middle class and those who aspire to it.”
The final vote was 227-205, with 13 Republicans voting against the bill. Not a single Democrat supported the bill.
“This is the most irresponsible bill I will have been confronted with in 37 years,” argues Maryland Democrat Steny Hoyer.
The path forward will be more difficult in the Senate, where Republicans are pushing to repeal Obamacare’s individual mandate as part of the tax plan.
Senate Republicans can afford to lose no more than two votes, and some Republicans have already expressed doubts about the chamber’s plan.
The Senate package includes a few provisions that are not in the House bill, including a new tax credit for employers who provide family leave and temporary changes to alcohol taxation. The Senate bill also has completely different rules about how the US taxes multinational corporations.
No matter what happens, we shouldn’t expect to see anything from the Senate until after the Thanksgiving holiday.
Editor’s note: This is a massive stimulous to the economy IF it passes as is. Some the effect has already hit the market psychology because it has been expected. Expect more when it passes the Senate. Expect a major pullback if it fails (it may drag out a long time like healthcare).