On Friday afternoon, congressional Republicans are poised to unveil the final draft of their plan to exacerbate economic inequality in the United States (or, as they put it, “reform the tax code”). The House and Senate have already passed their own tax-cut bills, and Republican leaders from each chamber have spent the past week trying to iron out the differences between the two drafts — and fix some haste-induced, multibillion-dollar mistakes.
Here’s a quick rundown of how the GOP’s final bill will (reportedly) differ from the party’s earlier versions. ADVERTISEMENT
What’s in:
A 21 percent corporate rate. The previous bills would have slashed the top corporate tax rate from 35 to 20 percent. The final legislation bumps that up to 21, so as to fund:
Yet another tax break for millionaires. The House bill kept the top marginal rate on individual income (for people who actually work for their money) at 39.6 percent. The Senate version lowered it to 38.5 percent. But in conference, Republicans concluded that their previous efforts had not redistributed quite enough wealth to the richest people in American society — and brought the top rate down to 37.
A bigger, refundable child tax credit. Marco Rubio injected some last-minute intrigue into the conference committee’s proceedings Thursday, when he announced that he would oppose the final legislation if it did not make more of the child tax credit refundable. The Florida senator’s (cogent) argument being that working parents who don’t earn enough money to pay much federal income tax — but are still subject to payroll taxes — shouldn’t get a smaller child-care subsidy than millionaire couples do.
The Senate bill doubled the current child tax credit from $1,000 to $2,000, while making $1,100 of that refundable. The bill would have also expanded access for the subsidy on one front — the legislation makes families that earn between $110,000 and $500,000 a year newly eligible for the tax credit — while contracting access on another: the bill would restrict eligibility to parents who have Social Security numbers, thereby cutting off a form of cash assistance to American children with undocumented guardians.
On Friday, Republican negotiators reportedly agreed to increase the refundability cap to $1,400. Thus, the final bill still gives a bigger subsidy to affluent families than to the working poor. But Rubio is (reportedly) satisfied with the compromise.
A slightly more generous state-and-local tax deduction. One of the primary sources of new revenue in both the House and Senate bills comes from scaling back the state-and-local tax (SALT) deduction. Initially, the GOP leadership had hoped to repeal the deduction entirely — a change that would have functioned as a large tax hike on affluent, upper-middle-class homeowners in high-tax (i.e., blue) states. Unfortunately for Paul Ryan, such homeowners are the core constituency of Republican House members from New Jersey, New York, and California. And so, the initial bills ended up preserving a $10,000 property tax deduction. But in California, property taxes are far less of a burden than state income taxes. And so, Golden State Republicans got the conference committee to let taxpayers deduct $10,000 of state property — or income — taxes from their federal liability, under the terms of the final bill.
Repeal of Obamacare’s individual mandate. This was in the Senate bill but not in the House’s. Repealing the tax penalty for going without insurance will decrease participation in Obamacare — and thus, decrease the amount the government spends on health insurance subsidies by roughly $300 billion over the next decade. Republicans need that money to pass giant tax cuts for the rich without violating their budget resolution (which forbids them from adding more than $1.5 trillion to the deficit over the next ten years).
The estate tax. The House bill would have fully repealed the 40 percent tax on inheritances worth more than $5.49 million for individuals and $10.98 million for families. The final bill preserves the tax, but temporarily doubles those thresholds — in 2026, the status quo estate tax go back into effect (watch out for an uptick in patricides among the one percent in 2025).
A slightly less generous mortgage interest deduction. Currently, Americans can deduct up to $1.1 million in mortgage interest. The House would have moved that cap down to $500,000. The final bill sets it at $750,000.
What’s out:
A provision that would have made the Koch Brothers’ anonymous donations to “nonprofit” political advocacy organizations tax deductible. The House bill would have repealed the Johnson Amendment — a law that prohibits nonprofit groups with tax-exempt status (like churches and charities) from directly participating in partisan politics. This would have enabled Evangelical megachurches to donate to political candidates, while also empowering billionaire donors to start using nonprofit public advocacy “charities” as tax-exempt super-PACs. The Senate parliamentarian ruled that the provision violated the rules of budget reconciliation.
The part designed to raise the bankruptcy rate for disabled people with expensive medical conditions. The House bill repealed the medical-expense deduction, a tax break used by a small number of extremely sick people. The final bill retains it.
The stuff that would have made a higher education (even more) unaffordable for ordinary Americans. The tax on graduate student waivers and the repeal of the student-loan interest deduction are both gone.
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