Ultra-wealthy win in Senate tax bill, other face hikes
Washington — Republicans have stretched closer to delivering the first big legislative victory for President Donald Trump and their party, whisking a $1.5 trillion overhaul of business and personal income taxes through the House. Thorny problems await in the Senate, though.
The House passage of the bill Thursday on a mostly party-line 227-205 vote also brought nearer the biggest revamp of the U.S. tax system in three decades.
But in the Senate, a similar measure received a politically awkward verdict from nonpartisan congressional analysts showing it would eventually produce higher taxes for low- and middle-income earners but deliver deep reductions for those better off.
The Senate bill was approved late Thursday by the Finance Committee and sent to the full Senate on a party-line 14-12 vote. Like the House measure, it would slash the corporate tax rate and reduce personal income tax rates for many.
But it adds a key feature not in the House version: repeal of the Affordable Care Act’s requirement that everyone in the U.S. have health insurance. Elimination of the so-called individual mandate under the Obama health care law would add an estimated $338 billion in revenue over 10 years that the Senate tax-writers used for additional tax cuts.
The Senate panel’s vote came at the end of four days of often fierce partisan debate. It turned angrily personal for Chairman Sen. Orrin Hatch, R-Utah, as he railed against Democrats’ accusations that the legislation was crafted to favor big corporations and the wealthy.
“I come from the poor people. And I’ve been working my whole stinking career for people who don’t have a chance,” Hatch insisted.
Republicans are hoping to send a compromise bill for Trump to sign by Christmas.
Senate Majority Leader Mitch McConnell declared, “For the millions of hard-working Americans who need more money in their pockets and the chance of a better future, help is on the way.”
The analysts’ problematic projections for the Senate bill came a day after Wisconsin Sen. Ron Johnson became the first GOP senator to state opposition to the measure, saying it didn’t cut taxes enough for millions of partnerships and corporations. With at least five other Republican senators yet to declare support, the bill’s fate is far from certain in a chamber the GOP controls by just 52-48.
Some winners and losers:
■ Wealthy individuals and their heirs win big. The hottest class-warfare debate around the tax overhaul legislation involves the inheritance tax on multimillion-dollar estates. Democrats wave the legislation’s targeting of the tax as a red flag in the face of Republicans, as proof that they’re out to benefit wealthy donors. The House bill initially doubles the limits — to $11 million for individuals and $22 million for couples — on how much money in the estate can be exempted from the inheritance tax, then repeals it entirely after 2023. The Senate version also doubles the limits but doesn’t repeal the tax.
Then there’s the alternative minimum tax, a levy aimed at ensuring that higher-earning people pay at least some tax. It disappears in both bills.
And the House measure cuts tax rates for many of the millions of “pass-through” businesses big and small — including partnerships and specially organized corporations — whose profits are taxed at the owners’ personal income rate. That’s potential cha-ching for Trump’s far-flung property empire and the holdings of his daughter Ivanka and her husband, Jared Kushner. The Senate bill lets pass-through owners deduct some of the earnings and then pay at their personal income rate on the remainder.
■ Corporations win all around, with a tax rate slashed from 35 percent to 20 percent in both bills — though they’d have to wait a year under the Senate measure.
■ U.S. oil companies with foreign operations would pay reduced taxes under the Senate bill on their income from sales of oil and natural gas abroad.
■ Beer, wine and liquor producers would reap tax reductions under the Senate measure.
■An estimated 13 million Americans could lose health insurance coverage under the Senate bill, which would repeal the “Obamacare” requirement that everyone in the U.S. have health insurance. The projection comes from the nonpartisan Congressional Budget Office. Eliminating the fines is expected to mean fewer people would obtain federally subsidized health policies.
■ People living in high-tax states would be hit by repeal of federal deductions for state and local taxes under the Senate bill, and partial repeal in the House measure. A compromise allows the deduction for up to $10,000 in property taxes.
■ Many families making less than $30,000 a year would face tax increases starting in 2021 under the Senate bill. By 2027, families earning less than $75,000 would see their tax bills rise while those making more would enjoy reductions, analysts find. The individual income-tax reductions in the Senate bill end in 2026.