Senate Republicans will release their version of a tax cut bill on Thursday, which proposes keeping seven brackets on the individual side and postponing the U.S. corporate tax cut by one year.
Under the Senate’s plan the individual tax brackets would fall at 10%, 12%, 22.5%, 25%, 32.5%, 35% and 38.5%, according to Senate Finance Committee senior staff members. The bottom rate is untouched from the current law, while the top rate is down one percentage point from 39.6%. The top rate would apply to those with incomes in excess of $500,000.
The House plan proposes collapsing the system into just 4 brackets: 12%, 25%, 35% and 39.6%.
While the House plan proposed phasing out the estate tax, known as the death tax, over the course of 6 years, the Senate’s would keep the tax in place, but double the current exemption.
Additionally, senior staff members said it would completely eliminate state and local tax (SALT) deductions, a sore point among lawmakers from high-tax states. House Republicans had proposed maintaining state and local property tax deductions up to $10,000.
On the individual side, the bill would also double the standard deduction, leave retirement plans untouched, preserve the deduction for medical expenses, expand the child tax credit to $1,600 and maintain the mortgage interest deduction cap of $1 million.
The Senate tax plan calls for one-year delay in the 15 percentage point cut to the corporate tax rate. The business tax reduction is one of the most expensive parts of the plan and postponing its implementation will save the government more than $100 million. As specified in the fiscal year 2018 budget, lawmakers have $1.5 trillion allotted for tax reform. The Congressional Budget Office said this week that the House plan would cost the government $1.7 trillion over the next 10 years.
The Senate plan would also expand a 17% deduction for pass-through entities. Like the House plan, it would also call for full and immediate expensing of new equipment. Further, the plan would allow businesses to deduct interest on loans.