- Corporations: The centerpiece of the House and Senate bills is reducing corporate taxes. Under the bills, the corporate income tax rate will be permanently slashed from 35 percent to 20 percent. It takes effect immediately in the House version and is delayed for a year in the Senate bill. The cut is estimated to save large companies $1.3 trillion over the next decade.
- Investors: Slimmed-down corporate tax bills have investors hoping a portion of the savings will be returned in the form of share buybacks or dividends — a prospect that is injecting optimism into markets that have been on a tear all year.
- Small businesses: Both bills cut taxes, at differing amounts, for most small and medium businesses where profits are passed through and taxed as the business owner’s personal income.
- Higher education: Endowments for colleges and universities would be hit with a 1.4 percent income tax. Proponents of higher education also fear the doubling of the standard deduction reduced the tax-savings incentive to donate to nonprofits and charities, including colleges. The House bill taxes the value of graduate school tuition waivers as income.
- Personal income tax: The House and Senate bills both cut personal income taxes and rewrite the tax brackets. Much of the benefit to lower- and middle-income filers will come through the bills doubling of the standard deduction. The House bill reduces brackets from seven to four. The Senate measure keeps seven, but cuts rates for all but the top $1 million-plus bracket. The House income tax cuts are permanent, while the Senate’s expire in 2025.
Under the Senate bill, all tax brackets get cuts in 2019. By 2021, people making under $30,000 would pay more than they do under current tax law. By 2027, people making less than $75,000 pay more taxes.
The House bill cuts taxes for everyone in 2019. In later years, some income groups pay more and some pay less.
The child tax credit is doubled to $2,000 per child in the Senate bill, while the House raises it from $1,000 to $1,600 and extends the cap on the credit to include families who make up to $230,000.
The popular mortgage tax deduction is limited by both bills. The Senate limits the tax deduction to what’s paid on the first $1 million of a mortgage. The House reduces that limit to $500,000.
High-earners who pay the “alternative minimum tax” would get away with paying little or nothing under the House bill, which does away with the tax. The Senate bill reduces the number of people who pay the AMT.
The limit for the inheritance tax is doubled to $11 million under the House plan, then repealed entirely in 2026. The Senate plan only doubles the limit....Read more