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| Senate Tax Bill Will Keep Mortgage Interest Deduction Intact | Senate Tax Bill Will Keep Mortgage Interest Deduction Intact |
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| WASHINGTON — Senate Republicans, who are set to unveil their sweeping tax rewrite today, plan to keep the mortgage interest deduction intact, a significant win for realtors and a deviation from the House bill under consideration. | WASHINGTON — Senate Republicans, who are set to unveil their sweeping tax rewrite today, plan to keep the mortgage interest deduction intact, a significant win for realtors and a deviation from the House bill under consideration. |
| The plan, which was described to the New York Times by multiple senators, will keep the current mortgage interest deduction cap of $1 million, deviating from the House bill, which caps at $500,000 the amount of new mortgage debt on which interest can be deducted. | |
| As expected, Senate Republicans also plan to eliminate the ability of people to deduct the state and local taxes they pay, which could set up a huge battle with House Republicans who have been feverishly pushing lawmakers to preserve the deduction. The House bill currently limits the deduction to $10,000 for property taxes only, a provision Republicans from New Jersey and New York have said would not be enough to win their votes. | |
| The details emerged as Republican Senators planned to release their long-awaited tax bill, which lawmakers hope to send to President Trump’s desk by Christmas. The House Ways and Means Committee is already debating its version of the bill, and the panel is expected to vote on it today, setting up a full House vote next week. | The details emerged as Republican Senators planned to release their long-awaited tax bill, which lawmakers hope to send to President Trump’s desk by Christmas. The House Ways and Means Committee is already debating its version of the bill, and the panel is expected to vote on it today, setting up a full House vote next week. |
| The stark changes between the bills show the differences emerging as the House and Senate push forward with competing versions of the most ambitious tax code rewrite in decades. | |
| The Senate bill would lower the corporate tax rate to 20 percent from 35 percent but would delay implementation for one year, with the new rate not kicking until 2019. The House bill includes no such delay and the White House has been lukewarm about such an idea. | |
| The Senate bill would continue allowing individuals to deduct medical expenses, a provision the House bill calls for eliminating. Senate Republicans also proposed seven tax brackets, as opposed to the four proposed by the House. It would keep the existing 10 percent bracket and lower the top rate for millionaires to 38.5 percent, down from today’s 39.6 percent rate. | |
| On Thursday, amid pushback from fellow Republican lawmakers, small businesses and other industry groups, Representative Kevin Brady, who chairs the Ways and Means Committee, unveiled a 29-page amendment making further revisions to the House’s tax plan. The amendment restores the adoption tax credit, which the House tax plan had planned to repeal. It also creates a new, lower tax rate for certain small business owners, a provision small business trade groups had been pushing for. | |
| Under the new provision, the first $37,500 of business income would be taxed at 9 percent, rather than 12 percent, for an unmarried individual earning less than $75,000 through a pass-through business. For a married couple, the dollar amounts would be double. | |
| The Senate is also including a provision to prevent large multinational corporations from stashing profits overseas. The bill will propose a new business tax on American and foreign companies as part of a sweeping tax rewrite lawmakers intend to unveil Thursday, according to Senate Finance Committee aides. | |
| The levy included in the Senate bill is a critical component of Republicans’ plans to overhaul how the tax code treats corporations, using both carrots and sticks. The plan will encourage domestic investment by lowering the corporate tax rate to 20 percent from 35 percent and will discourage companies from shifting money abroad by imposing the new tax. However, it remains to be seen whether the plan will have its intended effect: The Senate is expected to delay the corporate tax cut until 2019, according to a Republican senator and a lobbyist familiar with the plan who requested anonymity to discuss a plan that has not yet been released. | The levy included in the Senate bill is a critical component of Republicans’ plans to overhaul how the tax code treats corporations, using both carrots and sticks. The plan will encourage domestic investment by lowering the corporate tax rate to 20 percent from 35 percent and will discourage companies from shifting money abroad by imposing the new tax. However, it remains to be seen whether the plan will have its intended effect: The Senate is expected to delay the corporate tax cut until 2019, according to a Republican senator and a lobbyist familiar with the plan who requested anonymity to discuss a plan that has not yet been released. |
| Republicans in the finance committee have been meeting with staff members for weeks to craft the Senate bill. Democrats criticized their process even before the bill was released on Thursday. | Republicans in the finance committee have been meeting with staff members for weeks to craft the Senate bill. Democrats criticized their process even before the bill was released on Thursday. |
| “Not a single Democrat has had any input into this bill,” the Senate minority leader, Chuck Schumer of New York, said on the Senate floor. “It was constructed entirely behind closed doors by the majority party, who have no intention of negotiating with Democrats because they’ve locked themselves into a partisan process that only requires a majority vote. And they’re going to try to rush it through this chamber with reckless speed.” | “Not a single Democrat has had any input into this bill,” the Senate minority leader, Chuck Schumer of New York, said on the Senate floor. “It was constructed entirely behind closed doors by the majority party, who have no intention of negotiating with Democrats because they’ve locked themselves into a partisan process that only requires a majority vote. And they’re going to try to rush it through this chamber with reckless speed.” |
| The Senate plan will impose a tax on American and foreign companies that shift money earned in the United States offshore but will do it in a simpler way than a complex plan outlined in the House version, the aides said. “It levels the playing field” between domestic and multinational companies competing in the same markets, a committee aide said. | The Senate plan will impose a tax on American and foreign companies that shift money earned in the United States offshore but will do it in a simpler way than a complex plan outlined in the House version, the aides said. “It levels the playing field” between domestic and multinational companies competing in the same markets, a committee aide said. |
| Preliminary estimates indicate it would raise more than $130 billion in tax revenue over 10 years to help offset revenues lost from rate cuts, committee staff members said. The original House approach, which would have levied a 20 percent “excise tax” on payments between American and foreign companies that are affiliated with each other, would have raised an estimated $155 billion in revenue. | Preliminary estimates indicate it would raise more than $130 billion in tax revenue over 10 years to help offset revenues lost from rate cuts, committee staff members said. The original House approach, which would have levied a 20 percent “excise tax” on payments between American and foreign companies that are affiliated with each other, would have raised an estimated $155 billion in revenue. |
| The Senate approach would impose a minimum tax, of sorts, on the profits earned in the United States by multinational companies. | The Senate approach would impose a minimum tax, of sorts, on the profits earned in the United States by multinational companies. |
| Under current law, companies can avoid taxation on those profits by shuttling them to affiliated companies abroad, in countries where the corporate income tax rate is lower than it is in the United States. For example, the American subsidiary of a country based in Ireland, where the corporate tax rate is well below the American rate, could make payments to the Irish company for the use of its intellectual property. Those payments would be deducted from the American subsidiary’s profits, for tax purposes in the United States. | Under current law, companies can avoid taxation on those profits by shuttling them to affiliated companies abroad, in countries where the corporate income tax rate is lower than it is in the United States. For example, the American subsidiary of a country based in Ireland, where the corporate tax rate is well below the American rate, could make payments to the Irish company for the use of its intellectual property. Those payments would be deducted from the American subsidiary’s profits, for tax purposes in the United States. |
| The new approach would apply only to large multinationals that make a significant amount of payments to foreign affiliates. It would levy a 10 percent tax on the difference between a company’s actual tax liability and the liability it would have faced for the profits it instead moved offshore. | The new approach would apply only to large multinationals that make a significant amount of payments to foreign affiliates. It would levy a 10 percent tax on the difference between a company’s actual tax liability and the liability it would have faced for the profits it instead moved offshore. |
| So, for example, if a company made $100 million in American profits, but paid $80 million to a foreign affiliate for intellectual property rights, it would start with a tax liability of $4 million. (That’s from paying the bill’s proposed corporate tax rate, 20 percent, on an overall profit of $20 million.) It would then face an additional $4 million tax on the profits it shifted offshore. (The $80 million in payments would be subject to a 10 percent rate, which equals $8 million. Subtract the $4 million already paid, and you get the extra $4 million liability.) | So, for example, if a company made $100 million in American profits, but paid $80 million to a foreign affiliate for intellectual property rights, it would start with a tax liability of $4 million. (That’s from paying the bill’s proposed corporate tax rate, 20 percent, on an overall profit of $20 million.) It would then face an additional $4 million tax on the profits it shifted offshore. (The $80 million in payments would be subject to a 10 percent rate, which equals $8 million. Subtract the $4 million already paid, and you get the extra $4 million liability.) |
| Senate Finance Committee staff called that approach “more surgical” than the House bill. | Senate Finance Committee staff called that approach “more surgical” than the House bill. |
| The House watered down its excise tax proposal this week after it came under fire from a host of business and conservative groups, including the American Forest and Paper Association and Americans for Prosperity, an arm of the Koch political network. | The House watered down its excise tax proposal this week after it came under fire from a host of business and conservative groups, including the American Forest and Paper Association and Americans for Prosperity, an arm of the Koch political network. |
| In the House, Republicans were still wrestling with a critical math problem on Thursday over a sizable revenue hole to fill. To avoid a Democratic filibuster, the tax legislation can add no more than $1.5 trillion to federal budget deficit over a decade, and the House bill appeared to exceed that limit because it cut federal revenue by about $1.57 trillion over a decade, according to an estimate earlier this week by the Joint Committee on Taxation. | In the House, Republicans were still wrestling with a critical math problem on Thursday over a sizable revenue hole to fill. To avoid a Democratic filibuster, the tax legislation can add no more than $1.5 trillion to federal budget deficit over a decade, and the House bill appeared to exceed that limit because it cut federal revenue by about $1.57 trillion over a decade, according to an estimate earlier this week by the Joint Committee on Taxation. |
| Keeping the cost of the tax bill to $1.5 trillion will be a tough task for lawmakers, who are trying to reduce both corporate and individual taxes. The cut to the corporate tax rate alone is estimated to cost nearly that amount over a decade. | Keeping the cost of the tax bill to $1.5 trillion will be a tough task for lawmakers, who are trying to reduce both corporate and individual taxes. The cut to the corporate tax rate alone is estimated to cost nearly that amount over a decade. |
| Mr. Brady clarified on Thursday that the bill would not allow so-called pass-through businesses to deduct their state and local income taxes. Some lawmakers had raised concerns that the Republican bill appeared to allow pass-through businesses, which are currently taxed at the individual rates of their owners, to continue claiming the deduction for state and local income taxes, even though such a benefit would no longer be allowed for individual taxpayers, who would be limited to deducting $10,000 in property taxes. | |
| In a letter to Representative Earl Blumenauer, an Oregon Democrat, Mr. Brady said that pass-through businesses would still be able to deduct sales and certain property taxes but said that “state and local income taxes paid by an individual owner of such a business would not be deductible on the individual’s tax return.” | In a letter to Representative Earl Blumenauer, an Oregon Democrat, Mr. Brady said that pass-through businesses would still be able to deduct sales and certain property taxes but said that “state and local income taxes paid by an individual owner of such a business would not be deductible on the individual’s tax return.” |