November 16, 2017 2017-1941 House passes landmark tax reform bill, 227-205 13 republicans vote against bill; focus now shifts to Senate's tax bill The House on November 16, 2017, passed, by a mostly party-line vote of 227-205, the "Tax Cuts and Jobs Act" (HR 1), a key step in congressional Republicans' effort to enact the most extensive tax overhaul in 31 years. Attention will now shift to the Senate side, where a markup in the Finance Committee of Chairman Orrin Hatch's (R-UT) tax reform bill is continuing and will conclude by the end of the week. A vote on the Senate floor could come in the days after the Thanksgiving recess. The House and Senate would then need to agree on a compromise before final passage. In the vote, all the chamber's Democrats voted against HR 1, though two members (Reps. Mark Pocan, D-WI, and Frederica Wilson, D-FL) did not vote. The 13 Republicans voting against the bill were Reps. Dan Donovan (NY), John Faso (NY), Rodney Frelinghuysen (NJ), Darrel Issa (CA), Walter Jones (NC), Peter King (NY), Leonard Lance (NJ), Frank LoBiondo (NJ), Tom McLintock (CA), Dana Rohrabacher (CA), Chris Smith (NJ), Elise Stefanik (NY) and Lee Zeldin (NY). Floor remarks. In remarks on the House floor before the vote, Speaker Paul Ryan (R-WI) called the bill a "generational-defining moment." "Not only do people get to keep more money in their own pockets, but we dramatically simplify the tax system," he said. Ryan said that since the 2008 financial crisis, the U.S. economy has grown "at a limp 1 or 2% … 78% of our workers in this country are living paycheck to paycheck … Most Americans say they don't even have $500 in their bank account for an unexpected emergency or expense. This is not how it should be. We need to restore growth, we need to restore opportunity. Passing this bill is the single biggest thing we can do to grow the economy, to restore opportunity, and help these middle-income families who are struggling." In her own floor remarks, Minority Leader Nancy Pelosi (D-CA) called the bill "a tax scam" that would raise taxes on middle-class families. "With straight faces and with the speed of light — I have to give them credit — [Republicans] raced this thing through in the dark of night. They're trying to sell a bill of goods to the middle class that this is in their interest, that this is a middle-income tax cut," but she said the bill would raise taxes on 36 million middle-class families. Pelosi's remarks about the bill's effect on the middle class were echoed on the floor by Richard Neal (D-MA), the ranking member on the House Ways and Means Committee. Broad outlines of HR 1. The bill was considered under a closed rule that did not allow any amendments to be offered on the floor. No changes were made to the bill approved November 9 by the House Ways and Means Committee. Among many other provisions, HR 1 would permanently lower the U.S. corporate tax rate from 35% to 20% and would end the current system of taxing U.S. companies' worldwide income in favor of a "territorial" system that taxes only income earned within U.S. borders. The bill would repeal the corporate alternative minimum tax (AMT), while ending or modifying dozens of existing business tax breaks. The bill would allow full and immediate expensing of capital investments placed in service after Sept. 27, 2017, for five years. On the individual side, the House bill would institute a new system for calculating taxation of passthrough income. It would also consolidate individual income tax brackets from seven to four beginning with the 2018 tax year — 12, 25, 35 and 39.6% — while reducing or eliminating many credits and deductions. HR 1 would also almost double the standard deduction for different categories of taxpayers, increase the Child Tax Credit and abolish the estate tax by 2025. Notably, the House bill would repeal the deduction for state and local government income or sales taxes paid by individuals, though it would preserve a deduction for state and local property taxes, capping it at $10,000 (or $5,000 for a married person filing a separate return). The bill is estimated to reduce federal tax revenues by $1.4 trillion over 10 years. Senate status. On the Senate side, the Finance Committee is in the fourth day of marking up its own tax reform bill. Unlike the House bill, Chairman Orrin Hatch's (R-UT) version, also called the Tax Cuts and Jobs Act, includes what is effectively a repeal of the Affordable Care Act's (ACA) individual insurance mandate by reducing the tax penalty for not buying health insurance to zero starting in 2019. The Senate bill would reduce the corporate tax rate to 20% and make that rate permanent, though the bill's individual provisions would sunset after 2025. A modification of Hatch's "mark" released Tuesday night would also make pass-through provisions more generous and tighten international anti-base erosion provisions in future years. The Senate Finance markup is expected to conclude soon. ——————————————— Contact Information For additional information concerning this Alert, please contact: Washington Council Ernst & Young | • Any member of the group, at (202) 293-7474 . |
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