House Republicans Unveil Tax Reform Plan
November 2, 2017
House Republicans today unveiled their much anticipated legislative proposal (HR 1) to overhaul the nation’s tax code. At the heart of the Republican tax plan, known as the Tax Cuts and Jobs Act, is a proposal to shrink the current seven tax brackets into four – 12 percent, 25 percent, 35 percent, and 39.6%. It also proposes to nearly double the standard deduction to $12,000 for individuals and $24,000 for married couples. In addition, the measure would increase the Child Tax Credit from $1,000 to $1,600 per child. Alternatively, a credit of $300 would be available for non-child dependents.
Among other things, HR 1 would reduce the corporate tax rate from 35 percent to 20 percent. While there was some discussion about phasing in the cut or making it temporary, the legislation would immediately and permanently lower the rate. It also would impose a tax of as much as 12 percent on multinational companies’ accumulated offshore earnings. Under current law, the U.S. taxes multinationals on their global earnings, but allows them to defer taxes on foreign earnings until they bring them back to the U.S., or “repatriate” them.
With regard to the State and Local Tax (SALT) deduction, the proposal would preserve the deduction for property taxes up to $10,000; however, it would eliminate the deduction for income taxes. It should be noted that this issue has been one of the biggest sticking points in negotiations thus far, particularly from members of high-tax states like California, New York, and New Jersey. For its part, CSAC is working with the California congressional delegation, as well as a coalition of local government interests and others to urge House GOP leaders to fully preserve the SALT deduction.
Looking ahead, the House Ways and Means Committee is scheduled to begin consideration of HR 1 on November 6, with floor consideration expected the following week. Meanwhile, leaders on the Senate tax-writing committee are drafting their own proposal. Both chambers have expressed confidence that they will have a bill ready for the president’s signature by the end of the year.
(Additional details on the bill are available here.)