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Groton Daily Independent
Saturday, Nov. 114, 2017 ~ Vol. 25 - No. 125 ~ 54 of 66
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Tax split between House, Senate poses a big challenge By ANDREW TAYLOR and MARCY GORDON, Associated Press
WASHINGTON (AP) — The House and Senate tax overhaul plans are broadly similar, but crucial dif- ferences are creating headaches for Republican leaders determined to keep myriad interest groups and factions of the GOP satis ed. And then there’s the ambitious timetable they’ve set of nishing in time to get legislation to President Donald Trump by Christmas.
The most politically challenging decisions involve dealing with popular and widely used tax deductions, structuring tax cuts for business and balancing personal income tax rates between middle-class families and the rich.
All of these decisions come against a generous — but rm — 10-year, $1.5 trillion cap on the measure’s cost to the federal de cit. Both House and Senate have adopted accounting gimmicks to squeeze tax cuts that appear larger down to t that restraint.
Trump’s enormously expensive demand for a cut in the corporate tax rate to 20 percent — from the current 35 percent — is a big complication, as is unrest among House Republicans hailing from af uent suburban districts who are upset over the proposed loss of the deduction for state income taxes.
Here’s a rundown on the major differences between the House and Senate bills:
INDIVIDUAL TAX RATES
The Senate measure keeps the current number of personal income tax brackets, seven, though it changes
the rates to 10, 12, 22.5, 25, 32.5, 35 and 38.5 percent. That last top bracket for the wealthiest earners carries a higher rate of 39.6 percent under current law.
The House bill goes further toward simplifying the tax system. It shrinks the number of brackets from seven to four, with rates of 12, 25, 35 and 39.6 percent.
Lots of numbers here for congressional negotiators to play with, to move up or down.
The inheritance tax on multimillion dollar estates, called the estate tax, is an especially hot-button issue. Democrats point to the proposed GOP changes as proof that the Republicans are out to help wealthy people like Trump and his family.
Currently, when someone dies, the person inheriting the estate must pay taxes on its value above $5.5 million for individuals, $11 million for couples. The House bill initially doubles those limits and then repeals the whole tax after 2023. The Senate version doubles those exemption amounts — but doesn’t repeal the tax.
To repeal or not to repeal? That may be the class-warfare question.
DEDUCTIONS
The Senate bill would eliminate a taxpayer’s ability to deduct state income taxes and local property taxes.
But the nal bill may have to closely track a House compromise that provides a property tax deduction of up to $10,000 or else risk a revolt from GOP lawmakers from New York, New Jersey, and California.
The Senate bill preserves popular individual tax breaks for large medical expenses, mortgage interest, electric vehicles and college costs that were targeted by the House. The House limits deductibility of mort- gage interest to the rst $500,000 of a loan, riling the real estate and housing industries, and eliminates a deduction for medical expenses that’s often taken by families facing crippling nursing home costs.
BUSINESS:
Both the House and Senate versions slash the tax rate for corporations to 20 percent from the current 35 percent. But there’s a big twist: The Senate bill delays the rate cut for a year.
The delay was put in to reduce the bill’s cost by $100 billion or so — but it’s opposed by the White House and House Republicans. Wall Street hates it too. U.S. stock markets sold off Thursday in response to news of the proposed deferral, with industrial and technology stocks leading the decline, before recouping some