This article briefly describes the GOP tax plans.
1. The House has passed one tax plan. The Senate Budget Committee passed a tax plan Tuesday. The Senate now needs to vote on the Budget Committee plan.
2. If the Senate passes a plan such as the one the Senate Budget Committee passed, the Senate and House need to reconcile their plans.
3. The plans, thus far, have been approved solely upon party lines.
4. Both the House and Senate tax bills reduce the corporate tax rate from 35 percent to 20 percent. The House bill has this change taking effect immediately, whereas the reduction would occur in 2019 under the Senate bill.
5. The Senate tax plan provides some individual tax cuts, but these expire in 2025.
6. The tax plans reduce several itemized deductions. Of large import are state and local tax (SALT) deductions. Currently, itemizers can fully deduct income or sales and property SALTs. The House bill repeals SALT deductions for income and sales taxes, then caps the property deduction at $10,000. The Senate bill repeals all SALT deductions. Of large import, they eliminate the ability to deduct income or sales and property state and local taxes. Both plans do raise the standard deduction from $6,350 for single individuals to $12,000 and from $12,700 for married Americans to $24,000.
7. The Senate bill retains the current $1 million ceiling on home mortgage amounts that are eligible for interest deductions, whereas the House bill seeks to halve that ceiling to $500,000. The House tax plan's change has the potential to reduce the value of housing to some degree. The Senate bill also retains mortgage-interest deductions on second homes, whereas the House bill would eliminate them.
8. The tax plan has some impact on the municipal bond market. It generally means the costs to borrow using municipal debt will rise. This reduces the current value of municipal bonds.
9. The current Senate tax plan increases the U.S. budget deficit by approximately $1.4 trillion over 10 years.
10. The Senate bill reduces the top individual tax rate to 38.5 percent from the current rate of 39.6 percent. The House bill keeps the top rate of 39.6 percent unchanged but adds a "bubble rate" of 45.6 percent. Under this surcharge tax, Americans earning more than $1 million in taxable income would face an extra 6 percent tax on the next $200,000 they earn that exceeds $1 million.
11. As for taxes under the ACA, the House tax plan retains the current 3.8 percent investment income tax, 0.9 percent Medicare payroll tax and the individual mandate tax penalty. The Senate bill differs in that it repeals the individual mandate tax penalty, but is similar to the House bill in that it keeps the 3.8 percent investment income tax and the 0.9 percent Medicare payroll tax.
12. The tax plan includes reductions in taxes for certain types of LLCs and S corporations, which are known as pass-through entities. Pass-through income is currently taxed at personal income tax rates. The House bill calls for a maximum rate of 25 percent on pass-through income, while the Senate bill calls for 17.4 percent of pass-through income to be made deductible.
13. The House and Senate plans both immediately double the basic exclusion for estate taxes. The difference is the House bill fully eliminates estate taxes after 2024, while the Senate plan retains estate taxes with higher exclusions than currently exist.
14. Studies show that more families would, for the first several years, get a tax reduction versus a tax increase under the bill. However, it's a real mix as to the impact on taxpayers.
15. There is tremendous uncertainly over the actual impact of the tax plan on the economy, jobs and so forth.