On November 9, the Senate Finance Committee released its tax plan, following the House Ways and Means Committee plan last week. Since I sent a memo on the House plan last week, I will only note the differences between the two plans in this memo.
- The House Plan has four tax brackets (12%, 25%, 35%, and 39.6%). The Senate proposal has seven – all of which are lower than the current rates (10%, 12%, 22.5%, 25%, 32.5%, 35%, and 38.5%);
- The House plan increases the child tax credit from $1,000 to $1,600 and the Senate bill proposes $1,650;
- Both plans reduce the corporate tax rate to 20%, but the House bill makes the reduction in 2018 while the Senate delays the cut until 2019;
- The House doubles the current exemption on the estate tax to apply only to estates worth more than $10 million in 2018 and phases the cut out over six years. The Senate doubles the exemption next year and but keeps the tax in place;
- The House plan cuts deductions for major medical expenses by allowing a deduction only when expenses exceed 10% of income; the Senate keeps the deduction in place;
- The House bill only permits a mortgage interest deduction on the first $500,000 borrowed for a primary home and allows no deduction for second homes or home equity loans; the Senate keeps the current limit of $1 million but ends the deduction for home equity loans;
- House allows deduction of property taxes up to $10,000 but the Senate eliminates all state and local tax deductions;
- The House bill eliminates a deduction for interest on student loans but the Senate bill allows the deduction; and
- The House bill eliminates the deduction for the cost of class materials purchased by teachers from their own funds but the Senate leaves this deduction in place.
Also, critical to affordable housing, while the House Bill proposes to eliminate tax-exempt bonds, the Senate leaves the program intact.
The House and Senate must both complete “mark up” of the current plans and each must vote on a full bill. Since the two bills will have significant differences, a conference will be required between the two chambers to come up with a final bill, at which point it will go to the President for signature.
While not a sure thing, the plan is to have a bill for the President before Christmas.