The House today is likely to approve legislation to make permanent the individual and small-business tax cuts that Congress enacted in 2017, but the Senate won’t consider the measure before the November midterm elections.
Today’s vote is part of a three-bill package of tax relief dubbed “Tax Reform 2.0.” The House on Thursday approved legislation by Rep. Mike Kelly, R-Pa., that would expand retirement savings incentives and legislation by Rep. Vern Buchanan, R-Fla., to expand tax breaks for startups.
The House passed the retirement savings bill 240-177 with the support of 10 Democrats. The small-business bill won House approval 260-156 with the support of 31 Democrats.
Last year’s sweeping $1.5 trillion tax cut law lowers taxes for individuals, businesses and small businesses organized as pass-throughs. But those provisions are set to expire after 2025 unless Congress votes to renew them.
House Ways and Means Committee Chairman Kevin Brady, R-Texas, said the 2017 tax cuts are key to fueling the economy today.
“This roaring economy should be the new normal for America, not the sluggish Obama-era days that accompanied the broken tax code that Democrats seem to want to revive,” Brady said.
House Democrats have mostly panned the GOP’s tax cut bills, saying they will cause annual budget deficits to continue to balloon.
Even some House Republicans, including those from high-tax states such as New York and New Jersey, say they would vote against the bill today. The 2017 tax cut law capped deductions of state and local taxes.
Reps. Dan Donovan, R-N.Y.; Peter King, R-N.Y.; Frank LoBiondo, R-N.J.; and Chris Smith, R-N.J., wrote a letter to Speaker Paul Ryan, R-Wis., saying they would vote against the tax cuts if the bill didn’t address the cap on state and local tax deductions, which it doesn’t.
The House bill would make permanent the larger standard deductions – now $24,000 for joint filers, $18,000 for heads of household and $12,000 for individuals. Those deductions are also adjusted annually for inflation. The legislation would make permanent the seven individual tax brackets, including the top income tax rate of 37 percent.
But none of the tax cut bills the House approves this week will be considered by the Senate before November, a senior Senate Republican told Baker Hostetler’s Federal Policy team this week. In addition to requiring 60 votes to win approval in the Senate – the GOP has only 51 seats – Republican leaders don’t want to give politically vulnerable Democrats the opportunity to vote on making permanent the individual and small-business tax cuts.
Ten Senate Democrats are seeking re-election in states that President Donald Trump won in 2016.
Depending on the results of the November elections, it’s possible the House package or its component pieces could gain traction in the post-election lame-duck voting session in December.
There is bipartisan support in both the House and Senate to expand incentives for retirement savings, and one Republican senator on the tax-writing Finance Committee told BakerHostetler earlier this month that that provision could be included in year-end budget legislation during the lame-duck session.