Senate tax bill would delay corporate cuts
Top corporate rate would drop in 2019, a year later than House version
Senate Republicans unveiled a tax plan Thursday that would delay a deep cut to the top corporate rate by one year but keep some deductions and credits that had been on the chopping block, lower the top tax bracket and continue a modified estate tax.
“It will reduce individual tax rates across the board and direct substantial relief to low- and middle-income families and workers,” Sen. Orrin Hatch, Finance Committee chairman, said on the Senate floor. “It will bring down corporate tax rates, a goal long shared by Republicans and Democrats, and provide businesses with new opportunities for growth and expansion. It will modernize our international tax system.”
The top corporate rate would drop from 35% to 20% in 2019, a year later than it would in a revised bill approved by the House Ways and Means Committee. That change, which reduces the cost of the tax cut package, delays one of President Trump’s priorities for overhauling the tax code, but administration officials did not seem concerned.
“It’s a great day in moving in the right direction for middle-income tax cuts,” Treasury Secretary Steve Mnuchin said.
Still, the corporate delay will be one of many sticking points as the House and Senate try to compromise.
“As a means of creating economic growth, we’re in favor of beginning the tax cuts immediately rather than phasing them in. The president supports this position as well,” said Rep. Mark Meadows, who chairs the hard-line conservative House Freedom Caucus.
Meadows said if the Senate was looking for ways to cover the cost of restoring other tax deductions, it would be better to repeal the mandate in the 2010 Affordable Care Act that requires people to have health insurance. The Congres- sional Budget Office said Wednesday that change would reduce deficits by $338 billion over the coming decade but also lead to 13 million fewer people with insurance in 2027 and higher rates for those who remain in government-managed exchanges.
That provision was not in the Senate plan, nor was it added Thursday afternoon by Ways and Means Chairman Kevin Brady, R-Texas, in a revised bill he unveiled shortly before the panel voted along party lines to approve it.
Sen. Bob Corker of Tennessee said senators are discussing whether to add language repealing the Obamacare mandate. Earlier Thursday, House Speaker Paul Ryan, R-Wis., said he would favor the move.
“Of course I want to get rid of the individual mandate. … I want to get of the individual mandate any way I can because I think the individual mandate is doing great damage to people in this country,” he said.
Brady’s revised bill did make two changes to address criticism from Republicans: It restored the adoption tax credit and allowed military families to deduct moving expenses.
Even with the delay in corporate cuts, the Senate plan will increase the national debt by $1.5 trillion over the next decade if no benefits for economic growth are included in the analysis, Finance Committee aides said.
And that could be problem with deficit hawks in the Senate, who were looking for a plan that eliminates credits and deductions to balance the revenue losses of lower tax rates. The Senate kept deductions the House would end, such as those for major medical expenses, teachers’ classroom expenses and student loan interest.
But the Senate plan would eliminate the deduction for state and local income, property and sales taxes.