Dec. 05-- Competing versions of the Republican tax plan cleared both chambers of Congress in the last two weeks. Now a big question remains: Which version will prevail?
There are myriad differences in how the bills treat income. Three of the most significant have to do with tax-code simplification, the Affordable Care Act and corporate tax rates.
Clearly, simplification is in order. At some 74,000 pages (up from 26,000 in 1984), the code is just too complicated for most taxpayers to complete without the use of software or a professional tax preparer. It shouldn't be that way.
The House plan reduces the number of brackets from seven to four (12 percent, 25 percent, 35 percent and 39.6 percent) and seems the smarter way to go. The Senate plan maintains seven brackets (10, 12, 22, 24, 32, 35, 38.5 percent).
It's possible some people would be moved into a higher tax bracket with the compression of brackets, but in most cases that increase should be offset by the near-doubling of the standard deduction that exists in both versions of the bill.
The Senate bill eliminates the Affordable Care Act's mandate for the purchase of health insurance. While the mandate penalty acts as a tax, its reform has such complex ramifications on America's pursuit of a better health care system that it is better considered as part of a legislative focus on the Act itself. The Senate move appears to be an accounting trick meant to carve out $338 billion in savings.
Both the House and Senate bills include a reduction of the corporate tax rate from 35 percent to 20 percent. The U.S. corporate tax rate is one of the highest in the world-at both the statutory and effective rate)-which is why so many companies have moved their operations abroad. Lowering these rates, while standardizing enforcement, would bring more of these companies home to pay taxes.
It also would increase capital investment and make the U.S. more competitive.
Thankfully, both the House and Senate versions of the bill retain a deduction for property taxes, though both are capped at $10,000. This deduction is important to middle-class Texans, where property taxes are high to offset the state's lack of an income tax.
There's still a lot of haggling to be done. The competing measures are in conference committee, where members will try to meld the two into a compromise measure. If they are successful, the new measure will go back to the House and Senate for final-passage votes before moving, if approved, to President Donald Trump for his signature.
The precise effect the measures will have on taxpayer productivity, economic growth and the federal debt is still the subject of debate. As Republicans work to get a bill on Trump's desk for signature, we urge them to focus on simplification, the middle-class and boosting economic growth.
The House bill has four tax brackets. The Senate bill has seven.
The House bill doesn't repeal the individual mandate. The Senate bill does.
Both House and Senate versions maintain a property tax deduction capped at $10,000.
Both House and Senate versions cut the corporate tax rate from 35 percent to 20 percent
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