LINKEDINCOMMENTMORE

Washington – Significant differences separate the massive tax packages passed by the House and Senate on estate taxes, health care and a prized deduction for home mortgage interest, though Republican leaders are confident none is insurmountable.

Republicans are trying to pass the biggest rewrite of the tax system in more than 30 years.

“We’re looking forward to getting a final bill to the president’s desk, soon,” Senate Majority Leader Mitch McConnell, R-Ky., said Monday.

Both versions would cut taxes by about $1.5 trillion over the next decade while adding billions to the deficit. But they take different approaches.

“I don’t see anything here that is a deal-killer,” said Jon Traub, a former staff director for House Ways and Means Republicans who is now at Deloitte Tax.

The Senate bill passed by a thin 51-49 margin, so any changes in that measure will have to be negotiated with the senators who care about that issue, said Marc Gerson, a former tax counsel for Ways and Means and now chair of the law firm Miller & Chevalier.

The differences and how each issue is likely to play out:

Personal Income Tax Rates

The House bill condenses current seven brackets to four: 12 percent, 25 percent, 35 percent and 39.6 percent. The Senate measure retains seven brackets but changes them and reduces the top bracket from 39.6 percent to 38.5 percent.

The Senate bill ends the reductions in 2026; they’re permanent in the House version.

It has long been a Republican goal to reduce the number of tax brackets, so House Republicans will have a strong argument on this issue.

The Senate bill has been criticized because the tax cuts for individuals are temporary while the tax cuts for corporations are permanent. Senators, however, had to make some of the tax cuts temporary to comply with Senate rules that prevented Democrats from blocking the bill.

Home Mortgage Interest

The House version limits the deduction to interest paid on the first $500,000 of a loan for new home purchases. The Senate retains the current $1 million ceiling.

The housing industry is lobbying hard for the Senate version.

Alternative Minimum Tax

The House bill repeals both the individual and the corporate AMT, which is designed to ensure that higher-earning people pay at least some tax. The Senate bill scales back the individual AMT and keeps the corporate AMT.

House Majority Leader Kevin McCarthy, R-Calif., blasted the Senate plan on Monday, saying it would kill research and development because tax credits wouldn’t be worth as much. Expect a strong push to adopt the House version or to make significant changes to the Senate bill.

“They will have to do something different than what the Senate did,” said Rohit Kumar, a former aide to Senate Majority Leader Mitch McConnell, R-Ky. Kumar is now at accounting firm PwC.

Inheritance Tax

Under current law, when someone dies the estate owes taxes on the value of assets transferred to heirs above $5.5 million for individuals, $11 million for couples. The House bill initially doubles those limits and then repeals the entire tax after 2023. The Senate bill doubles the limits but does not repeal the tax.

This is an ideological battle. Very few estates pay the tax, but repealing it has long been a Republican goal. They call it the “death tax.”

“That’s one where it seems likely that the Senate prevails,” Kumar said. “I don’t say that lightly because

Health Law Mandate

The Senate bill repeals the mandate that requires the vast majority of Americans to buy health insurance; the House version does not.

The Senate is likely to prevail because many House Republicans support repealing the mandate. Also, repealing the mandate would raise $318 billion over the next decade, according to congressional estimates, because fewer people are expected to apply for tax credits to help pay for health insurance.

That’s money that can be used to pay for other tax cuts.

Other tax bill comparisons

Personal exemption: Both bills eliminate the current $4,050 personal exemption.

State and local taxes: Senate, House bills end federal deductions for state and local income and sales taxes, but they allow the deduction for up to $10,000 in property taxes.

Tax credits: Senate doubles per-child tax credit to $2,000. House raises per-child tax credit from $1,000 to $1,600, extends it to families earning up to $230,000. Creates a $300 tax credit for each adult in a family, which expires in 2023. Both bills preserve the adoption tax credit.

Other deductions: Senate bill preserves deduction for medical expenses not covered by insurance but ends deductions for moving expenses and tax preparation. House eliminates medical expense deduction.

Corporate taxes: Senate, House bills both cut current 35 percent rate to 20 percent, but Senate has one-year delay in dropping the rate.

Businesses: Senate, House bills both expand write-offs allowed for companies that buy equipment.

Multinational corporations: Senate, House bills impose a one-time tax on profits that U.S.-based corporations are holding overseas. Senate bill also ends tax advantages for firms moving overseas, and requires corporations to continue paying the business version of the alternative minimum tax. House measure seeks to eliminate tax incentives that encourage some U.S. companies to move overseas.

Associated Press

LINKEDINCOMMENTMORE
Read or Share this story: http://detne.ws/2kmzVio