Senate and House Republicans each passed their own version of the Tax Cuts and Jobs Act, yet differ in various ways, setting arguments into motion.
When the chambers pass different versions of a bill, conferees are appointed by both the House and the Senate to produce a “conference report” that is satisfactory to the majority of conferees from each chamber. The closer the two sides are going into conference, the easier the resulting process.
The focus of the Tax Cuts and Jobs Act is to lower taxes mainly for corporations and smaller businesses, and a portion of individual taxpayers. Targeted are wealthy individuals who live in high tax states that may lose valuable deductions. So the emphasis of tax reform this time around is on reducing corporate taxes, paid for by higher taxes on wealthier individuals due to a sustained top tax rate and loss of various deductions.
Where both the House and the Senate agree:
Applying Chained CPI;
Retain the state and local tax property tax deduction, capped at $10,000;
Expand 529 college savings accounts to apply to some primary and secondary education;
20 percent corporate rate, reduced from 35%;
Applying the Chained CPI to benefit payments, such as Social Security, is a means of reducing the U.S. federal budget deficit by reducing the rate at which government benefits grow. The government currently uses the standard CPI to calculate COLA increases for Social Security payments. The Chained CPI essentially assumes that consumers will choose less expensive substitutes to purchase during rising inflation. Less expensive goods will pull down inflationary calculations possibly leading to smaller COLA increases.
Some states and municipalities that issue tax-free bonds will be affected. Bonds issued by municipalities to build certain complexes such as a sports stadium, would no longer qualify for tax exempt status, leaving it to private investors and owners to figure out financing.
Before the President can formally endorse the passage of the tax reform proposals, both the House and Senate will have to agree on one plan. The objective is to have the House and Senate hash out the details of both plans into a single piece of legislation and have it ready for signature by the President by the end of the year.
Sources: Tax Foundation, IRS, Congress.gov/bill/115th-congress/house-bill/1