House Republicans on Thursday introduced their tax bill providing long-awaited details about their plans to revamp the U.S. tax code and cut rates for companies and individuals.
The legislation, called The Tax Cuts and Jobs Act, represents the most sweeping overhaul of the tax system in decades — though it does not really simplify the code in the way many tax experts have called for over the years.
Broadly speaking, it would slash taxes on both individuals and corporations, adding $1.51 trillion to federal deficits over a decade. Changes on the individual side of the tax code will create winners and losers, even among the middle class. (We've got a rundown of all the key provisions here, and you can read the full 429-page bill, or summarized versions, here.)
Republicans say the average family of four would save nearly $1,200 a year, but analysts say businesses would be the biggest beneficiaries. “Boiled down to the basics, it is a mid-sized tax cut — aimed mostly at businesses and their owners,” the Tax Policy Center’s Howard Gleckman wrote. Of the $1.5 trillion cost, about two-thirds comes from business tax cuts, while individual cuts account for $300 billion and the eventual repeal of the estate tax accounts for $200 billion.
Here's what else you need to know:
Republicans Are Pitching This as a Win for the Middle Class: “With this plan the typical family of four will save $1,182 a year on their taxes,” House Speaker Paul Ryan said. “That $1,182 more covers about a year’s worth of gas for your car. It covers your family’s phone bill for the year, depending how much data, of course, your kids use. That $1,182 more, it can help you pay down your debt faster. It can help you start and renovate your home faster. That $1,182 more for the average family that will help you put more money away for college, it will help you save for retirement, it will help you save for a rainy day.”
And a Way to Keep U.S. Companies and Jobs at Home: “We’re not just putting higher octane fuel in an old clunker of a tax car,” House Ways and Means Chairman Kevin Brady said. “We propose to drive a newer tax car that can compete and win against any country in the world. So that redesign for simplicity, fairness and competitiveness — I predict, under this tax reform plan, America will vault from 31st in the world among our competitors to the top three as the best places on the planet for that next new job, that next new manufacturing plant, that next new research headquarters.”
President Trump Says It Will Be a 'Big, Beautiful Christmas Present' for America: “It will be the biggest cut in the history of our country,” Trump said. Fact check: It will not.
But Not All Republicans Are Necessarily on Board Yet: Some GOP lawmakers from high-tax states need to see how their constituents will fare under the proposed changes, most notable the $10,000 cap on the state and local property tax deduction. Rep. Dan Donovan of New York said, “I’m going to analyze it to see what’s best for the people I represent.” And Sen. Marco Rubio tweeted that he's not happy with the size of the increased child tax credit: "House #TaxReform plan is only starting point. But $600 #ChildTaxCredit increase doesn’t achieve our & @potus goal of helping working families."
Critics Argue the Middle Class Isn’t Getting Much Benefit Right Now: “Some in the middle class will see their taxes go up, others will see their taxes go down, but on average, they’ll get peanuts,” says Lily Batchelder, a former deputy director of the White House National Economic Council under President Obama.
And Will Eventually Get Stuck with the Bill for Higher Deficits: Opponents of the bill say that the cuts will eventually have to be paid for — and that means the middle class will likely get hurt. “Make no mistake: @GOP tax cuts for the rich will bankrupt our country - and it's the grandkids of the middle class who have to pay it back,” Democratic Rep. Seth Moulton tweeted.
Budget Hawks Call the Bill Fiscally Irresponsible: “Not only would today’s legislation cost more than $1.5 trillion over a decade, but it includes a number of gimmicks, including allowing certain provisions to expire, that could ultimately result in more than $1.5 trillion of new deficits,” Maya MacGuineas, president of the Committee for a Responsible Federal Budget said in a statement. “The bill also continues to rely on unrealistic economic growth assumptions to justify its cost.”
The New Pass-Through Rules Could Be an Obstacle: The National Federation of Independent Business said it could not support the bill in its current form, because it "leaves too many small businesses behind" — namely, some professional service businesses that would not be allowed to use the lower tax rate for pass-through entities. Rep. Mark Meadows, chairman of the House Freedom Caucus, also has concerns, saying: “I want to make sure the pass-through rate for small businesses is actually a pass-through rate for all businesses — I’m hearing that may not be the case, and that is a problem.”
Changes to the Mortgage Interest Deduction Will Also Raise Opposition: The bill would limit deductions on loans at $500,000, half the current level. "This change could have a particularly big impact on high-cost areas, such as San Francisco, New York, Boston, and the Washington D.C. area," The Washington Post's Damian Paletta and Mike DeBonis wrote. The National Association of Homebuilders and the National Association of Realtors made it clear even before the bill was released that they would oppose it, and the NAR confirmed that stance today, saying the tax bill “appears to confirm many of our biggest concerns.”
But the Retirement Industry Breathes a Sigh of Relief: The Save Our Savings Coalition, which represents some big hitters in the retirement business, including AARP, T. Rowe Price and TIAA, was pleased that the bill included none of the rumored rule changes for the 401(k) and other retirement accounts. "The proposal released today is good news … Under this plan, American workers, families, and retirees will continue to have the freedom to choose the savings vehicles that best suits their needs," the group said in a statement. However, Bob Reynolds, CEO of Putnam Investments, said the industry will be on the lookout for changes as the bill makes its way through Congress.
Markets Initially Skeptical: Stocks were basically flat and bond yields fell after the bill was released. Brad Bechtel of Jeffries Group said, “Clearly the market is a little disappointed in it. It’s probably not as robust as people had hoped for.” Aaron Kohli of BMO Capital Markets expressed doubts about the bill's political prospects: "The math doesn't add up. The market is skeptical of how the warring factions within the GOP and between the GOP and Democrats will really come together enough on this to get the necessary votes." But the initial doubts seemed to wear off, with the Dow hitting a record high in a "wild session" later in the day.
The Battles Aren't Over: Republicans say the bill will be marked up by the House Ways and Means Committee starting Monday, and it reportedly may undergo some changes even before that. Lobbying efforts are only going to intensify now that the details are out. And the Senate's tax bill is still to come. We've got a long way to go before any tax cuts are passed.