The House and Senate passed the final version of the Tax Cuts and Jobs Act on Wednesday—224-201 in the House; 51-48 in the Senate—sending the legislation to President Trump's desk for his signature.
The bill, which passed the House on Tuesday, underwent a revote today since provisions in the bill as passed yesterday violated procedural rules.
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The final legislation includes slight changes to the House and Senate versions. The tax reform proposal keeps the number of individual tax brackets at seven but reduces the rates to 10, 12, 22, 24, 32, 35, and 37 percent, increases the Child Tax Credit from $1,000 to $2,000 for singles and married couples, and roughly doubles the standard deduction.
On the corporate side, the bill reduces the corporate tax rate from 35 to 21 percent and also eliminates the Affordable Care Act's individual mandate, which requires individuals to purchase health insurance or pay a penalty to the IRS.
Speaker of the House Paul Ryan (R., Wis.) said a family of four earning an income of roughly $73,000 can expect to receive a tax cut of about $2,059 under the new plan.
"The Tax Cuts and Jobs Act will put Americans back on top, with a new tax system designed to give a boost to American businesses big and small," Ryan says. "The corporate tax rate will drop from 35 percent—the highest in the industrialized world—to 21 percent—America's lowest rate since 1940."
"When companies invest in the United States, the demand for workers increases, which in turn drives up wages for individuals and families," he said. "By lowering taxes across the board, eliminating costly special-interest tax breaks, and modernizing our international tax system, the Tax Cuts and Jobs Act will help create more jobs, increase paychecks, and make the tax code simpler and fairer for Americans of all walks of life."
Other measures on the individual side in the final legislation include allowing individuals to write off state and local taxes up to $10,000, keeping the mortgage interest deduction, expanding the medical expense deduction for costs more than 7.5 percent of income, expanding the charitable deduction, keeping the Earned Income Tax Credit, and doubling the exemption for the Death Tax, to name a few of the provisions.
On the corporate side, the final bill allows for immediate expensing, gives a 20 percent tax deduction for S corporations, partnerships, LLCs, and sole proprietorships, preserves the R&D tax credit, shifts the tax system from a worldwide system so job creators can avoid double taxation, and eliminates incentives for companies to move overseas.
On Nov. 16, the House passed the original version of the tax reform proposal, which included reducing the number of tax brackets to five—0, 12, 25, 35, and 39.6 percent—reducing the corporate tax rate from 35 to 20 percent, and not repealing the Affordable Care Act mandate. A few weeks later, the Senate passed its original version of the bill, which maintains seven brackets for individual rates, repeals the Obamacare mandate, and cuts the corporate tax rate to 20 percent.
The Tax Foundation has scored the final tax proposal and says that as it is written, the legislation would increase GDP by 1.7 percent, wages by 1.5 percent, and add 339,000 jobs to the economy.