In the U.S. House, the Tax Cuts and Jobs Act ( H.R. 1) (the Act) was approved by a vote of 227-205 yesterday. The legislation lowers the top corporate rate of 35 percent to a flat 20 percent. On the individual side, the bill would collapse the existing seven income tax brackets to four with rates of 12 percent, 25 percent, 35 percent, and 39.6 percent, and would roughly double the standard deduction. The Act would also limit home mortgage interest deductions, cap state, and local property tax deductions and eliminate deductions for other state and local taxes, and double the estate tax exemptions for 7 years, repealing the tax in 2025. Several employee benefit changes are included in the Act including (1) eliminating the deduction that employees can claim under tax code Section 127 for employer-provided education assistance, (2) repealing the income exclusion for employee achievement awards, (3) repealing employer-provided dependent care assistance programs to pay for work-related expenses, and (4) eliminating the income exclusion for housing and meals provided to employees for the employer’s convenience. The Act would add approximately $1.44 trillion to the deficit, according to the Joint Committee on Taxation, the official non-partisan scorekeeper for Congressional tax bills.
Tax reform legislation is also being considered by the Senate. Yesterday, the Senate Finance Committee approved its tax reform bill along party lines by a vote of 14-12. The bill will now be considered by the full Senate after the Thanksgiving break. At this time, the actual language of the bill is not yet available but see our blog entry from yesterday for more information about the bill. We will provide further updates when the language is released.