WASHINGTON – Congress approved the most sweeping overhaul of the U.S. tax code in more than 30 years, but it was unclear exactly when President Donald Trump would formally sign the measure into law.
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The president might wait until January to sign the tax bill.
One of Mr. Trump's top economic advisers, Gary Cohn, said Wednesday morning the timing of the bill's signing depends on the outcome of separate talks in Congress about a government spending measure. The White House wants to use those talks, which are taking place this week, to waive automatic spending cuts triggered by deficits and the tax plan. If Mr. Trump can't get the waiver, he might delay signing the tax bill, which would be another way to put off the automatic cuts.
Those deliberations were in flux after the House vote was 224-201 on a measure that will touch every part of the economy and aims to put American corporations on a more favorable footing against international rivals. The House had already voted once in favor on Tuesday afternoon. Once again, all Democrats voted against the legislation, as did 12 Republicans, almost all from high-tax states where many residents will face higher tax bills. The Senate had passed the bill early Wednesday morning after removing language that had triggered procedural problems, and then sent back the revised version.
"We got it done," Mr. Trump said at a midday cabinet meeting at the White House. He thanked Senate Majority Leader Mitch McConnell (R., Ky.) and House Speaker Paul Ryan (R., Wis.) by name. "We have a tremendous amount of talent" in each chamber, he said.
At the heart of the Republican tax plan is a cut in the corporate tax rate to 21% from 35%. The tax plan also cuts individual tax rates across the board and aims to simplify the tax code by eliminating some deductions, trimming others, and jettisoning a personal exemption. In 2019, about 48% of households will receive a tax cut of greater than $500, according to the Joint Committee on Taxation. The tax cuts will peter out over time.
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Passage of the tax bill sets the stage for a hectic period early next year, when employers must scramble to change withholding schedules, and businesses and individuals must reconsider myriad financial decisions. Companies will have to evaluate their debt levels, given new limits on the deduction of interest payments, and consider whether to bring back money stockpiled overseas.
Home buyers will have to consider whether to take out mortgages exceeding $750,000, the amount above which interest is no longer deductible. People with home-equity loans will confront a changed world in which line-of-credit interest payments are no longer tax-deductible. Those in high-tax states, such as California, New York and New Jersey, will have to adjust to a new $10,000 limit on deductions for state and local taxes. People with high medical expenses will have to evaluate how a temporary expansion of a medical-expense deduction, retroactive to the current year, affects their finances.
Middle-class households -- who have been courted by both parties in recent years -- will have to weigh whether they come out ahead under the new tax law. Households making from $20,000 to $100,000 a year, who make up half of all tax-filers, will get about 23% of the tax cuts going to individuals in 2019, according to the Joint Committee on Taxation. The wealthiest 1%, who make at least $500,000 a year, would also get about 23% of the tax cuts going to individuals that year. The tax burden on each segment of the population would remain relatively stable, with households making between $100,000 to $200,000 a year accounting for 29% of the tax burden placed on individuals, the largest share of any income group.
The vote is a political victory for two lawmakers who had yet to make names for themselves during the last major tax overhaul in 1986. Mr. McConnell had only been elected to the Senate in 1984, and Mr. Ryan was a teenager. The next challenge for the two leaders and for Mr. Trump becomes selling the tax bill to an uneasy public, a task Republicans expect will become easier once tax cuts take hold.
"If we can't sell this to the American people, we ought to go into another line of work," Mr. McConnell told reporters after the vote.
This tax overhaul was different in pacing and tone, if not ambition, from the one of three decades ago, creating a confusion that has made the tax plan unpopular. The 1986 tax overhaul was legislated over more than a year. This time, it was little more than seven weeks from the time the House bill was unveiled on Nov. 2 to the time of passage. The 1986 tax law was the product of a bipartisan agreement. This tax bill passed along partisan lines, using a procedural tool that enabled the Republicans, who hold a majority, to elbow aside Democrats.
After campaigning on a tax cut and a repeal of the Affordable Care Act, Republicans can now argue they made good on at least one of their biggest promises. The GOP plan also includes a repeal of the health law's mandate that most Americans hold health insurance or pay a penalty. Democrats cited forecasts from the Congressional Budget Office that the elimination of the mandate would lead to higher premiums and more uninsured people. Republicans said that penalties were predominantly paid by people who had trouble affording insurance. According to the CBO, 86% of the fines were paid by households making less than $100,000.
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(END) Dow Jones Newswires
December 20, 2017 15:14 ET (20:14 GMT)