House Passes GOP Bill to Overhaul Tax System--Update

By Richard Rubin and Siobhan Hughes Features Dow Jones Newswires

The House of Representatives passed a bill that would usher in the most far-reaching overhaul of the U.S. tax system in 31 years, backing a plan that would lower the corporate tax rate to its lowest point since 1939 and cut individual taxes for most households in 2018.

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The bill would repeal the alternative minimum tax, increase the child tax credit, abolish the estate tax by 2025 and transform the U.S. system for taxing multinational corporations. The plan would raise taxes on some people by removing personal exemptions and deductions for state and local income taxes, medical expenses and student loan interest. On the whole, the bill would reduce federal taxes by $1.4 trillion over the next decade.

The 227-205 House vote was a victory for Speaker Paul Ryan (R., Wis.) and President Donald Trump, who rallied with Republicans in the Capitol before the vote. Republicans want to finish the new tax law before the year ends, and they are banking on it as an economic boon and the key to their political futures.

Thirteen Republicans voted against the bill; no Democrats voted for it.

"We are in a generational defining moment for our country," Mr. Ryan said on the House floor before the vote, declaring that the bill would lead to faster economic growth and higher wages. "It is finally time that we get the general interest of this country to prevail over the special interests in Washington."

The political imperative for the GOP, along with support from business groups and conservatives, spurred Republicans to move quickly, and Thursday's vote came exactly two weeks after they revealed the first version of the bill.

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But there are warning signs ahead as the focus turns to the Senate's companion bill. Most of the House Republicans who voted no on Thursday were from New York, New Jersey and California. They opposed the new limits on the state and local tax deduction, and the Senate's changes are even more severe, denying a $10,000 property-tax deduction that the House bill includes. That means Thursday's margin may get even tighter if and when a final bill emerges.

The Senate's passage of its own bill is no certainty either, as just three Republicans can block any plan. Sen. Ron Johnson (R., Wis.) already declared his opposition to the treatment of partnerships, S corporations and other so-called pass-through businesses. Sen. Susan Collins (R., Maine) has expressed concerns about the Senate GOP's decision to pair the tax bill with a repeal of the mandate for individuals to have health insurance. And Sens. Jeff Flake (R., Ariz.) and Bob Corker (R., Tenn.) say they are worried about budget deficits.

For the moment, though, House Republicans were gleeful. Mr. Ryan hugged Majority Whip Steve Scalise (R. La.), who is responsible for rounding up votes, right after the totals were announced.

Democrats called the House tax plan a giveaway to wealthy business owners and warned that it would drive the country deeper into debt and serve as a prelude to future cuts in Social Security and Medicare. They highlighted what they called budget gimmicks in the bill, including the expiration of a crucial family credit in 2023 that would bring higher taxes in the future.

"They're trying to sell a bill of goods to the middle class," said Rep. Nancy Pelosi (D., Calif.), the House Democratic leader. "It preys on the middle class and those who aspire to it. It pillages and loots the middle class."

The House plan would provide, on average, tax cuts for every income group in 2019, according to the nonpartisan Joint Committee on Taxation, which analyzes tax policy for Congress. About 8% of households would pay more in 2019 and that proportion would rise over time, according to JCT.

The House vote leaves Republicans exactly where they were on health policy earlier this year, with a bill passed by one chamber that won't be accepted as written by the other.

There are some important differences between the House bill and its Senate counterpart, now headed for a floor vote after Thanksgiving. The Senate version features completely different rules on how the U.S. taxes multinational corporations and pass-through businesses.

Rep. David Schweikert (R., Ariz.) said he was "intrigued" by the Senate's approach on international taxation.

"It might solve one or two of our issues," he said.

The Senate proposal includes provisions that aren't in the House bill at all, including temporary changes to alcohol taxation and a new tax credit for employers who provide family leave.

The Senate plan sets all of its individual tax cuts to expire after 2025. That helps their plan comply with a rule under the fast-track procedure they are using to pass the bill without needing Democratic votes. Under that process, the bill can't increase budget deficits beyond 2027. The corporate tax changes would be permanent.

Senators on Thursday sparred over new analyses of who wins and loses under their plan. In 2021, because some low-income households wouldn't purchase health insurance, they wouldn't get subsidies in the form of tax credits. As a result, households earning between $10,000 and $30,000 would see higher tax burdens on average.

"This is absolutely not a tax increase and you guys know that," Sen. Pat Toomey (R., Pa.) said to Democrats at a Finance Committee meeting.

And by 2027, after the individual tax cuts expire, households earning under $75,000 would have tax increases on average under the Senate plan, compared with current law, an element that has prompted fierce opposition from Democrats.

"I don't know how anybody can go home now to the folks they represent and explain why it's a good idea to hike taxes on parents who barely stay afloat to pay for a massive corporate handout," said Sen. Ron Wyden (D., Ore.). "What is happening now is just shameful."

Write to Richard Rubin at and Siobhan Hughes at

(END) Dow Jones Newswires

November 16, 2017 14:50 ET (19:50 GMT)