Republican lawmakers appeared to secure enough votes on Friday to pass the most sweeping tax overhaul in decades, putting them on the cusp of their first significant legislative victory as leaders geared up to pass a $1.5 trillion tax cut along party lines and send it to President Trump by Christmas.
A day after the bill’s prospects wavered somewhat, Republican leaders notched two victories on Friday, when Senator Marco Rubio of Florida said he would vote yes after gaining a more generous child tax credit in the final bill and Senator Bob Corker of Tennessee, who voted against the initial Senate bill over deficit concerns, said he would support the legislation. The bill also won praise from Senator Susan Collins of Maine, leaving it likely to pass with all 52 Senate Republicans in support.
The final legislation released by Republicans on Friday follows the broad strokes of the previous House and Senate bills, providing deep and longstanding tax cuts for businesses, including a corporate tax rate of 21 percent, down from the current 35 percent. The bill also provides temporary tax benefits for low- and middle-income Americans, including lower marginal tax rates, and a new top tax rate of 37 percent for the wealthiest Americans, down from 39.6 percent. All of the individual tax breaks will expire at the end of 2025.
The final bill does build back in some of the prized tax breaks that had been slated for elimination in the House legislation, including the deduction for high out-of-pocket medical costs, tax-free tuition waivers for graduate students and the ability to deduct interest on student loans. But it also includes new limits on other popular tax breaks, including the mortgage interest deduction and the state and local tax deduction.
In a pre-emptive move against accounting maneuvers in high-tax states such as New York and California, the bill prohibits taxpayers from prepaying next year’s state and local income or property taxes, in order to deduct them from 2018 taxes. That form of tax planning would have allowed taxpayers to benefit more from the full state and local deduction this year before it is capped next year.
The bill also includes changes large and small to appease business lobbyists and their congressional champions, such as additional tax relief for the owners of engineering and architectural firms and the elimination of a change in capital gains treatment of homes sales — a key priority for the real estate industry.
One of the biggest changes came on Friday, when lawmakers agreed to a demand by Mr. Rubio to expand the child tax credit by allowing families who owe no federal income taxes to still claim up to $1,400 of the $2,000 child tax credit, up from $1,100 in the original version. But that change was offset by limiting the bill’s benefits to some higher-income families, and by restricting it to children age 16 and below, down from 17 and below in the Senate bill. The net result was a credit that is more lucrative for lower-income earners but actually slightly less costly than the Senate bill.
Republicans must stay within a $1.5 trillion limit that lawmakers have allowed on the amount the bill can add to federal deficits if they want to pass it without Democratic support.
The bill’s price tag had been a sticking point for one senator, Mr. Corker, a longtime deficit hawk, who voted against the initial Senate bill over concerns it would add to the federal debt. But on Friday, he said he was swayed to support the bill despite its cost. The congressional Joint Committee on Taxation analysis showed the Senate plan would add $1 trillion to the federal budget deficit.
“This bill is far from perfect, and left to my own accord, we would have reached bipartisan consensus on legislation that avoided any chance of adding to the deficit, and far less would have been done on the individual side with items that do not generate economic growth,” he said.
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