House Releases Tax Reform Proposal, Markup Next Week

House Releases Tax Reform Proposal, Markup Next Week

After several months of negotiations between the big six (Treasury Secretary Steven Mnuchin, National Economic Council Director Gary Cohn, House Speaker Paul D. Ryan, Senate Majority Leader Mitch McConnell, House Ways and Means Committee Chairman Kevin Brady, and Senate Finance Committee Chairman Orrin Hatch), the House Ways and Means Committee released its tax code overhaul plan this week.

The House Ways and Means Committee will begin marking up H.R. 1, the Tax Cuts and Jobs Act on Monday at noon. Chairman Kevin Brady (R-TX) expects the markup to last through Thursday. He is hopeful the bill would then be considered on the House floor the week of November 13. Brady wants all amendments to be offered during committee markup to avoid amendments being offered on the House floor. Senate Majority Leader Mitch McConnell said the Senate is aiming to introduce its own tax reform bill as early as next week (Nov 8?). Majority Leader McConnell may delay the Thanksgiving recess to vote on their tax reform bill.

The House and Senate will use the budget reconciliation process to pass the tax reform measure, which will only require a majority vote in both chambers. Assuming all Democrats vote against the measure, the House cannot lose more than 22 Republicans and the Senate Republicans cannot lose more than two votes from its members. The process also limits Senate debate to 20 hours.

Here are some of the highlights of H.R. 1:

Individual Tax

  • Lowers individual tax rates to 12%, 25%, and 35% but maintains rate at 39.6% for high income Americans (over $1M)
  • Increases the standard deduction from $6,350 to $12,000 (individuals) and from $12,700 to $24,000 (married)
  • Expands Child Tax Credit from $1000 to $1600
  • Continues the deduction for charitable contributions
  • Preserves the home mortgage interest deduction for existing mortgages and maintains the home mortgage interest deduction for newly purchased homes up to $500,000
  • Continues the deduction for state and local property taxes up to $10,000
  • Repeals the Alternative Minimum Tax
  • Doubles the exemption for the estate tax and repeals it after 6 years
  • No changes to tax treatment of 401(K) contribution limits

Business and Corporate Tax

  • Lowers corporate tax rate to 20% down from 35%
  • Allows businesses to immediately write off full cost of new equipment
  • Preserves the R&D tax credit
  • Makes it “easier” and “far less costly” to repatriate earnings
  • Establishes new safeguards to distinguish between individual wage income and pass-through business income

Other Provisions

  • New 1.4% tax on private university endowments for schools with more than $100,000 per student
  • Tax-exempt religious organizations would no longer be barred from political speech

Original Introduced Bill Text:

Amendment in the Nature of a Substitute (Chairman’s Mark):

Section-By-Section Summary:

Joint Committee on Taxation Estimated Revenue Effects:

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