Congressional Republicans are looking to finalize the tax bill before the holidays. House Majority Leader Kevin McCarthy, R-Calif., has said that the House will be in session the week of December 18, to pass the Tax Cuts and Jobs Bill (HR 1) after the measure is finalized. Competing versions of the bill are expected to be reconciled by a House-Senate conference committee. While the House and Senate versions of the bill are similar, there are differences.
Child Tax Credit
Both the House and Senate bills enhance the child tax credit but only the House bill makes these enhancements permanent. The House bill calls for a $1,600 child credit; the Senate bill increases the credit to $2,000. There may an eleventh hour push in the conference committee to go with the $2,000 credit. Conferees will need to look for additional revenues to offset the cost of the higher credit.
“I remain surprised that there is not more consensus to support the reality that we do need to do more to help working people in this country and the child tax credit is one of the best tools to do it,” Sen. Marco Rubio, R-Fla., said on December 6. Two days later, Rubio cautioned conferees not to weaken the child tax credit in a tweet. Rubio, and his Senate colleague, Mike Lee, R-Utah, have been lobbying for a higher child tax credit.
Conferees also will need to iron out differences in the treatment of education incentives. The House bill proposes to overhaul the American Opportunity Tax Credit (AOTC), which the Senate bill leaves alone. The Senate bill also does not eliminate the current above-the-line deduction for student loan interest. The House bill repeals this incentive after 2017.
The House bill also would treat graduate student tuition waivers as taxable income. The Senate bill would not. The proposed change has generated push-back. “A tax on graduate tuition waivers would be unfair, would undermine our competitive position and would inhibit the economic growth that tax reform promises,” Rep. Pete Sessions, R-Tex., said on December 7.
The alternative minimum tax (AMT) is a significant revenue raiser. The AMT is slated for elimination after 2017 under the House bill. The Senate bill retains the AMT but increases the exemption amounts ($70,300 for individuals and $109,400 for married couples filing joint returns). The House bill also eliminates the corporate AMT, which the Senate bill keeps. “House members feel strongly that the (conference) position should be to repeal permanently both the individual and the corporate,” Ways and Means Chairman Kevin Brady, R-Tex., said.
Other provisions that are reportedly being discussed for amendment include extending the lower rate on pass-through entities to include entities structured as trusts, reconciling conflicting base erosion and repatriation rules, determining the fate of the mortgage interest deduction, reconsidering the extent to which the state and local tax deduction should be released, and raising the corporate income tax rate to 22-percent. President Trump last week had floated the idea of raising the corporate rate to 22-percent in order to generate revenue for other tax cuts. Senate Majority Leader Mitch McConnell, R-Ky., however, followed up with his opinion that the rate should remain at the 20-percent mark already reflected in both the House and Senate versions.
Finalize Tax Bill
Brady announced on December 8 that House-Senate Conference on HR 1 would hold an open meeting on December 13.” Our open meeting will be an opportunity for the conferees to discuss our best, most pro-growth tax reform ideas that will help improve the lives of all Americans,” according to Brady. “We are committed to delivering the Tax Cuts and Jobs Act to the President’s desk this year and fulfilling our promise to people across our country,” he added.
Meanwhile, Democrats in Congress have criticized the GOP for what they say is a lack of transparency going to conference. “The Republican track record shows that this will be a conference in name only while the real tax plan details are hammered out in secret without any Democratic input,” Sen. Ron Wyden, D-Ore., said on December 7.
By George Jones and George L. Yaksick, Jr., Wolters Kluwer News Staff
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