What's in the Senate tax bill, and how is it different from the version passed in the House?

What's in the Senate tax bill, and how is it different from the version passed in the House?

UPDATED 7:27 PM ET, 12/2/2017

Now that the increasingly unpopular Senate tax bill has passed, it’s getting likelier that congressional Republicans just might notch their first major legislative victory since last year's election gave them unified control of the federal government. The Senate bill passed on December 1st differs markedly from the bill passed in the House in mid-November. There are also, however, important similarities, particularly when it comes to how the federal government would treat corporations. Let’s take a look at where these bills do and don’t line up, and what that means for ordinary Americans.


According to Politifact, both plans would:

  • Lower individual income tax rates for the middle class;
  • Reduce the corporate tax rate from 35 percent to 20 percent;
  • Double the standard deduction, although the Senate sunsets it after 2025.

Both versions of the plan, according to the Tax Policy Center, a nonpartisan think tank, would benefit the rich and very rich to much greater degree than the working and middle classes. In fact, taxes “would rise modestly for the lowest-income group,” (my emphasis). In an emailed comment, Mark Mazur, the director of the Tax Policy Center, explained that "the repeal of some itemized deductions is the driver" for tax increases on low-income folks, "along with SSN requirements for claiming various tax credits."

Both plans would also increase the national deficit: most analyses out there project revenue loss due to tax cuts to outpace economic growth. The Congressional Budget Office projects weak growth over the next few years, and the Tax Policy Center projects the tax bill to boost the national GDP by 0.6 percent in 2018 and 0.3 percent by 2027 – nowhere near the growth Republicans are promising. The economy has, however, grown by more than 3 percent over the last two quarters, raising Republican hopes for long-term growth.

Another important similarity that's especially important to large, multinational corporations, is that both bills would switch the US from a 'worldwide' tax system to a 'territorial' one. Most of the US's trading partners use the territorial tax system, which only taxes income on business inside their borders. The current US system, in which businesses pay the difference between the corporate tax rate and the rate paid on overseas earnings, is "a big reason why multinational firms have kept assets overseas," explains John Buhl of the Tax Foundation, a nonpartisan think tank that tends to favor tax cuts.

All told, the tax bill, if passed, would add about $1.4 trillion to the national debt over the next ten years, potentially triggering the "Pay As You Go," or paygo, rule, "which requires across-the-board spending cuts to a variety of mandatory programs including Medicare, if the costs of the tax cuts aren't fully offset by revenue increases," as Tracy Jan observes at the Washington Post.


The Tax Policy Center has a nifty side-by-side chart showing the current tax law, along with what’s in the Senate and House versions. The differences, in many cases, come down to how long changes are put in place: the Senate version has lots of sunset provisions that the House version doesn’t, likely designed to ensure that, if the projected growth doesn’t occur, there’s a mechanism for stiffening taxes to refill the federal coffers. There is also, along these lines, work being done in the Senate to include an automatic trigger that raises taxes if the bill “fails to jumpstart the economy,” as the Associated Press reports. The provision, which is still under construction, would automatically increase corporate taxes by up to $350 billion, reports Bloomberg. It’s unclear if the trigger will make it in to the final version, though: a handful of GOP senators and conservative groups have opposed it, and that resistance is swelling. That battle is also an indicator of a bigger schism in the Republican Party, according to James Hohmann at the Washington Post: "True fiscal conservatives worry that the party they once dominated has been hijacked by hypocritical spendthrifts." It's a tug-of-war between those who want to shrink the national debt, and those who want to cut taxes and shrink the federal government. Deficit hawks have reason to worry: the last time the GOP had unified control of the federal government, when George W. Bush was president, "congressional Republicans spent like drunken sailors."

For a more detailed look at the battle over the trigger provision, take a look at this piece from The Atlantic’s Russell Berman.

At the National Review, Veronique de Rugy argues that a better trigger “would be to cut spending, all spending, across the board, if revenue projections fall short.”

Anyway, here are some of the major differences between the House and Senate plans:

  • The House version consolidates the seven current tax brackets into just four, while the Senate version keeps seven, but tweaks the percentages.
  • Both versions repeal the Alternative Minimum tax, but the Senate version sunsets it after 2025.
  • The House version would increase taxes on grad students exponentially, by repealing the student loan interest deduction, tuition and fees deduction, and the Lifetime Learning credit. The move reflects a growing partisan divide on higher education: in July, the Pew Research Center found that 58 percent of Republicans and Republican-leaning independents think colleges and universities have a negative effect on the country, while 72 percent of Democrats and Democrat-leaning independents think the opposite.
  • The House version repeals the medical expense deduction, which would likely increase taxes for folks with serious health issues.
  • The Senate tax bill would repeal the Affordable Care Act’s individual mandate penalty, which, if passed, would likely mean rising premiums and millions of Americans losing coverage, according to a Congressional Budget Office (CBO) report. The White House has already signaled its willingness to jettison the repeal, if it increases the likelihood of the bill’s passage.

Like with any bill these days, Republican leadership will have to find a way to balance competing interests – although there are signs that the debate, in the GOP, is mellowing. Two senators pushing for competing provisions – Bob Corker (R-TN), who’s advocating for the aforementioned trigger provision, and Ron Johnson (R-WI), who wants to see bigger cuts for pass-through companies “whose owners pay taxes through the individual code instead of using corporate rates” – voted in the Budget Committee to advance the bill to the Senate floor, “passing on a chance,” as the Washington Post reports, “to largely derail the process.” Susan Collins (R-ME), who’d previously objected to the individual mandate repeal, changed her mind after leadership promised bigger property tax deductions and committed to a vote on the Alexander-Murray bill, which would provide federal subsidies to help stabilize the health insurance market.

Democrats, for their part, have all opposed the tax plan, criticizing it as too advantageous to rich folks and corporations. Senate Minority Leader Chuck Schumer (D-NY) called the process “starkly partisan and unwise,” according to Reuters, and Democratic senators from red states have complained that Republicans are shutting them out, reports Bloomberg. Under reconciliation rules, however, the bill just needs a simple majority to pass, and the GOP currently holds a 52-48 advantage.

header image: "tax," 401kcalculator.org / flickr

sinkhole's Republican Tax Bill FAQ

sinkhole's Republican Tax Bill FAQ

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