In the past few weeks both houses of Congress have presented proposals on tax reform, both of which with an end goal of decreased income tax rates for businesses and individuals.
The House of Representatives Ways and Means Committee released their draft tax reform proposal on November 2, 2017. Within a week the proposal was marked up, amendments were made, and H.R. 1 was approved by the Committee. H.R. 1 is now moving to the House floor for debate anticipating a vote before the Thanksgiving holiday.
The Senate Committee on Finance released on November 10, 2017, its Chairman’s Mark – a plain English summary, not legislative text – of its tax proposal bearing the same name as H.R. 1, Tax Cuts and Jobs Act. A summary of the Senate proposal can be downloaded here. Although the proposals carry the same name and few similarities, there are significant differences. Several highlights of the Senate proposal include the following:
- 20 percent corporate income tax rate starting in 2019
- Seven individual income tax brackets with a maximum tax rate of 38.5 percent
- A 17.4 percent deduction for the portion of pass-through qualified business income, capping at 50 percent of W-2 wages. The deduction is not available to certain service businesses unless below a threshold.
- Doubling the estate and gift tax exemption
- Repealing the Alternative Minimum Tax (AMT)
- Repealing an individual’s state and local tax deduction when not paid or accrued in carrying on a trade or business
- Repealing mortgage interest deduction for home equity loans, retains $1M limit for acquisition debt
- Retaining deduction for medical expenses
- 1.4 percent excise tax on endowment income for private colleges with assets of at least $250,000 per student
- Adopting a chained CPI-U inflation measure
- Expanding the child tax credit
- Numerous proposals including repeal and modification of many current tax laws
The Senate Finance Committee will debate the Chairman’s Mark and make amendments, which is expected to start next week.
Visit DHG’s Tax Reform Home Page frequently for analysis on the Tax Cuts and Jobs Act and other tax reform developments.
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