Senate Republicans voted late Tuesday night to approve their final tax overhaul, paving the way for the bill to reach President Donald Trump’s desk and be signed it into law.
In the end, every Republican senator backed the plan, with the exception of Sen. John McCain, who was recovering from cancer treatment in Arizona. The only Republican who had opposed the earlier version, Sen. Bob Corker of Tennessee, reversed himself and supported the final bill. Every Senate Democrat opposed it.
For technical reasons, the House is expected to take up the bill one more time. But after it sailed through the lower chamber earlier Tuesday, that should be just a brief detour before the legislation reaches Trump.
The bill represents the most significant rewriting of the nation’s tax code in a generation — though in many ways it falls short of the high-minded “reform” Republicans set out to do, as the New York Times documented over the weekend. Republicans are going to slash the corporate tax rate from 35 percent to 21 percent, cutting taxes for businesses by roughly $1 trillion over the next years. The bill will also lower the tax rate for top individual earners, roll back the estate tax, and expand the child tax credit (an expansion whose effects are minimal for the poorest Americans).
The bill doubles the standard deduction people can take, which should lead to fewer Americans itemizing their deductions. But many favored tax breaks — for mortgage interest, for medical expenses, for student loans — will remain in some form.
Most independent analyses project that the bill would send the biggest benefits to the wealthiest Americans by cutting corporate taxes and taxes on “pass-through” businesses and on rich individuals and inheritances. The legislation also allows, because of the Senate’s budget rules, the individual tax cuts to expire in 2025, meaning Americans will see significant tax hikes in later years unless a future Congress acts to stop them.
The Republican plan is not fully paid for, with experts projecting it would increase the federal deficit by more than $1 trillion over the next 10 years, even accounting for any economic growth it could help create. Republicans have argued the economy will grow so fast that the deficit won’t actually increase at all, but no independent analysis backs that claim.
The bill would also repeal Obamacare’s individual mandate, the requirement that every American buy health insurance or pay a penalty. The Congressional Budget Office estimates that the mandate’s repeal would lead to 13 million fewer Americans having health insurance in 10 years, versus current law, and insurance premiums increasing an additional 10 percent in most years. This marks the most significant blow Republicans have dealt to the health care law, after failing to more substantially repeal it earlier this year.
The original House bill had either eliminated or curtailed many cherished tax breaks. But even the deduction for state and local taxes, a ripe target for Republicans because it mostly benefits Democratic-led states, will be partially preserved in the final bill. Other credits and deductions, like those for adoptive parents, will be preserved after outcry over the original Republican proposal.
Republicans have sped through their tax overhaul, desperate for a legislative win after the failure of Obamacare repeal. The House introduced their original bill at the beginning of November and the final version is expected to hit Trump’s desk less than two months later.