Party leaders in the House and Senate agreed in principle to tax reform legislation that bridges the gaps between their competing versions. The leaders of the tax-writing committees in the House and the Senate — Rep. Kevin Brady and Sen. Orrin Hatch — say the final bill is “close” to completion.
The Senate seems to have made out better than the House. The New York Times reports that “more of the Senate bill appeared to be included in the final version.”
Both chambers accepted a slightly higher corporate tax rate. The House and Senate versions both lowered that rate to 20 percent. In the compromise bill, the rate is 21 percent, still much lower than the current 35 percent rate. The new rate will kick in next year rather than in 2019, as the Senate version provides.
Three other important provisions in the Senate bill, but not the House version, made it into the compromise. First, the consensus bill repeals the Obamacare mandate requiring Americans to purchase health insurance or pay a penalty. Second, it opens the Arctic National Wildlife Refuge in Alaska to energy exploration. Third, the agreement allows taxpayers to continue to deduct high out-of-pocket medical expenses.
The compromise bill lowers the top individual tax rate to 37 percent. Currently that rate is 39.6 percent. However, the bill scales back some popular tax breaks, including the state and local tax deduction and the deductibility of mortgage interest.
In the case of mortgage interest, the House and Senate split the difference. The deal caps that deduction at $750,000 for newly purchased homes. This is higher cap than the $500,000 limit in the House-passed bill but lower than the $1 million limit that currently exists and remains in the Senate-passed bill.
Republican leaders say they expect a vote on the compromise bill to occur next week. If so, newly elected Doug Jones will have no say. Indeed, Majority Leader McConnell has said Jones won’t take office until next year.
Democrats are squawking about this, but Susan Collins, a key vote in the Senate, declared: ““I see no need to wait for Doug Jones to become a senator.” Neither do I.