The House Ways and Means Committee on Thursday advanced legislation to cement the individual tax changes in President Trump’s tax law as House Republicans seek to shine a light on their biggest recent legislative accomplishment ahead of the midterm elections.
The bill, part of a package Republicans are calling “Tax Reform 2.0,” passed the committee on a party-line vote of 21-15 after hours of debate between Democrats and Republicans over the value of the measure and the 2017 tax law.
{mosads}The bill is expected to get a vote on the House floor later this month but isn’t expected to be taken up by the Senate, where it would need 60 votes to pass.
The individual tax changes in the 2017 law — which include the lower tax rates, larger standard deduction, deduction for income from noncorporate businesses and the $10,000 cap on the state and local tax (SALT) deduction — are currently set to expire after 2025. GOP lawmakers made these tax changes temporary in order to pass the 2017 measure under budget rules that allowed the bill to pass the Senate with a simple-majority vote.
Republicans argue that the 2017 tax law has helped boost the economy, and they view making the individual tax cuts permanent as a way to build off the measure they passed last year.
“It will give American families, workers, and Main Street small businesses certainty and will continue to fuel the strong economic growth we’ve witnessed over the past year,” Ways and Means Committee Chairman Kevin Brady (R-Texas) said.
But Democrats on the committee all opposed the 2017 tax law and opposed extending that measure’s tax changes.
They argued that the 2017 tax law primarily benefits the wealthy and adds to the debt and that making the tax changes permanent will only provide more benefits to the rich and increase the debt further. Democrats also called the vote a political exercise ahead of the midterms, noting that the Senate is not expected to take up the legislation.
Ways and Means Committee ranking member Richard Neal (D-Mass.) called the 2.0 legislation “another reckless tax cut for the wealthy that leaves behind average Americans.”
Democrats also criticized the SALT deduction cap, since the deduction is particularly relied upon in high-tax areas that skew Democratic. Most of the 12 House Republicans who voted against the 2017 tax law are lawmakers from New York, New Jersey and California who opposed the SALT deduction cap, and some of them have said they plan to vote against the second bill on the House floor because it would make the cap permanent.
Democrats offered a series of amendments during the markup, including those that would restore the full SALT deduction, expand family-related tax credits and cement a lower threshold for eligibility for the medical-expense deduction. But Republicans defeated the amendments.
Republicans also rejected a Democratic amendment to request Trump’s tax returns, saying it’s not germane. Democrats have repeatedly sought for the Ways and Means Committee to request Trump’s returns from the Treasury Department and are vowing to do so if they win control of the House in the midterm elections this November.
In addition to approving legislation to make the individual tax cuts permanent, the Ways and Means Committee passed the other two bills in the “Tax Reform 2.0” package. One is aimed at encouraging savings for retirement and other purposes, while the other is aimed at incentivizing business investment.
Republicans sought to blunt Democrats’ criticisms about the bill’s distributional and deficit impacts. Brady brought up estimates of the size of the tax cut that the average families in Democrats’ districts are estimated to receive, and he said that many Democrats on the committee voted to make the Bush tax cuts permanent, which added to the debt.
The Joint Committee on Taxation, Congress’s tax scorekeeper, has estimated that making the individual tax changes permanent will lower federal revenue by about $631 billion from 2019 to 2028. Outside groups say that the price tag will be even greater in subsequent years, with the Urban-Brookings Tax Policy Center estimating that the bill will cost more than $3 trillion from 2029 to 2028.
Joint Committee on Taxation estimated that a substantial percentage of the tax cuts will go to high earners, but that the percentage of federal taxes paid by those making at least $1 million would increase. The Tax Policy Center estimated that those with income of between $357,000 and $836,000 would benefit the most from the bill as a percentage of after-tax income.