Senate Bill to Unwrap with Tax Cuts, End to Local Deduction

Posted November 10, 2017

The plan's elimination of a federal tax deduction for state and local taxes has sparked the most resistance from the party.

The bills represent the first major reshaping of the US tax code in three decades, and the effort is the top priority for President Donald Trump and Republicans who've failed to deliver any major legislation this year despite controlling the House, Senate and the White House.

The feverish efforts by Republicans in both chambers were aimed at fulfilling a self-imposed deadline to get legislation out of the House and Senate before Thanksgiving, so that the period between Thanksgiving and Christmas could be devoted to reconciling the two versions. Some of the bill's provisions threaten GOP rebellion. While 1.6 million households in New Jersey claim the property tax deduction today, that number is expected to fall by almost 60 percent next year, to just 650,000, under the House bill.

The House version would collapse the current seven tax brackets into four, while the Senate would retain seven.

The Senate plan would be more generous than the House, however, on the mortgage interest deduction, imposing a cap of $1 million on new homes to qualify compared to the $500,000 set by the House.

Early reports of the delay in making public the Senate tax plan sent the Dow Jones Industrial average down more than 200 points, though business interests had anxious the phase-in would last even longer and the market recovered.

The Senate plan largely overlaps with the House proposal, but does not repeal the estate tax and leaves the mortgage interest deduction unchanged.

The full House hopes to vote on the tax plan next week, giving lawmakers little time to review the plan, which will likely stretch hundreds of pages long. The bill would eliminate certain taxes, like the Alternative Minimum Tax and the so-called "death tax".

The Senate would boost the child tax credit to $1,650 and raise the income threshold for the measure.

Shrinking that rate to 20 percent from its current 35 percent has been a primary goal of Trump and the business community, and delaying that reduction would help contain the bill's costs. Both would drastically reduce the corporate tax rate and also lower rates for individuals, while eliminating deductions claimed by many people.

The tax reform plan crafted by House Republicans would add $1.7 trillion to the debt over the next decade, according to a brief analysis released Wednesday by the nonpartisan Congressional Budget Office (CBO).

Senate Republicans are using special budget reconciliation rules that prevent a Democratic filibuster.