The US House of Representatives voted 224-201 Wednesday to give final approval to the sweeping Tax Cuts and Jobs Act [HR 1 materials].
With the Senate’s approval [JURIST report] earlier Wednesday, the legislation now moves to President Donald Trump for signature.
The legislation had been approved by the House Tuesday but was sent back for a revote due to a procedural issue [JURIST reports].
Among the changes the bill would make are the the reduction of the corporate income tax rate from 35 percent to 21percent, and the setting of marginal income tax rates at 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent and 37percent, with accompanying changes in the income brackets to which those rates apply. Notably, the top marginal tax rate doesn’t kick in until $500,000 individuals and $600,000 for those who file jointly, an increase in the thresholds of $418,400 and $470,700, respectively, under current law.
The bill also raises the child tax credit from $1,000 per child in 2017 to $2,000 per child and makes up to $1,400 of the credit refundable. For slightly different kinds of families, the current estate tax exemption of $5 million per individual and $10 million per couple were more than doubled to $11 million per individual and $22 million per couple.
Many of the more controversial aspects of the earlier bills did not survive the committee process. Student loan interest will still be deductible, teachers can still benefit from a $250 credit for classroom supplies, children must still be born to benefit from 529 savings accounts and certain medical expenses remain deductible as under the current code.
The bill also makes changes to the carried interest deduction [Tax Policy Center materials], requiring that assets be held for three years as opposed to one year under current law in order to benefit from the preferential 23.8 percent tax rate.
Apart from these changes to taxation directly, the bill will also effectively repeal the individual mandate provision of the Patient Protection and Affordable Care Act (ACA) [text], which currently imposes a $695 tax penalty on filers who don’t have minimum insurance coverage. Although the penalty remains technically in effect, the amount of the penalty is set at $0. This method of repeal closely mirrors the Supreme Court’s 2012 decision finding the individual mandate constitutional because it is a tax [JURIST report].