Wait, what just happened?

At 1:36 am on Saturday morning, the Senate passed the Tax Cuts and Jobs Act, the first major tax overhaul in more than 30 years. The bill, which passed on a 51-49 vote, is the first major legislative victory for Republicans this year, and, after a flurry of eleventh-hour changes (some scrawled in sloppy handwriting in the margins), is set to radically cut taxes for corporations and the wealthy, while providing mixed blessings, at best, for middle and working-class folks.

For a more comprehensive summary of what just happened, you can take a look at this piece from the Associated Press, or this one from Reuters.

So does this mean my taxes are changing?

Not yet, no. First, the Senate and the House will have to go to conference to reconcile their two bills, which differ markedly on key points. Then both will need to pass that new final version of the bill. And then President Trump will need to sign it into law. Even then, the changes won’t affect your filing for 2017.

What are the differences between the two bills, and how do they get resolved?

Just about every major news outlet in the country has an explainer on the differences between the two bills – including us! Below is a brief list of some of the major differences as they stand today:

• Tax brackets. The House, in keeping with their stated goal of simplifying the tax code, collapsed the current seven brackets into just four: 12 percent, 25 percent, 35 percent, and 39.6 percent. The Senate kept seven brackets, but tweaked the percentages, most notably lowering the top bracket to 38.5 percent. Both moves are projected to increase the deficit by more than a trillion dollars over the next ten years, according to a Washington Post analysis.
• Weird stuff that doesn’t really seem to have much to do with taxes. One of the biggest, weirdest features of the Senate’s tax bill is the inclusion of wish-list items unrelated to taxes. In particular, the Senate included a repeal of the Affordable Care Act’s individual mandate in their bill. Paul Ryan, Speaker of the House, has indicated his willingness to include the individual mandate repeal in a final version, so that’s likely going to stay in the bill. Which likely means healthcare premiums in ACA markets will spike – the Congressional Budget Office (CBO) estimates that 13 million more people will be uninsured by 2027 (either willingly or because the price is prohibitive), and that premiums will rise about 10 percent on average every year over the next decade.
• The (im)permanence of tax cuts. The House version of the tax bill makes both corporate and individual tax cuts permanent, but the Senate version, in a sign of its priorities, keeps the corporate tax cut permanent but sunsets the individual cuts after 2025 – for them to keep all the other stuff they had in the bill and not shoot past the $1.5 trillion deficit (this is the line in the sand for the rule that allowed them to pass the bill with a simple majority, instead of the standard 60 votes) they had to do this.
• When the corporate tax cuts start. The House bill cuts the corporate tax rate next year, but the Senate – again to help preserve other items in the bill – delays it a year. That last, extra year at 35 percent would provide approximately $127 billion, according to that aforementioned Post analysis, allowing the Senate to keep some deductions that the House simply eliminates.

For those interested in further exploration, take a look at these articles:

• “Here are 7 differences Republicans must resolve between their tax bills,” Washington Post
• “Dueling Tax Plans: Here’s What the Senate and House Have to Resolve,” New York Times
• “How the Senate and House tax brackets compare,” CNBC
• “Here’s what’s in the Senate tax bill – and how it differs from the House’s bill,” CNN
• “The Biggest Sticking Points Between Senate and House Tax Bills,” Bloomberg
• “Republicans still have a lot of differences between the House and Senate tax bills to hash out,” Vox

Has the corporate tax rate ever been this low?

Not since 1939 has the top corporate tax rate been at 20 percent or below, according to data from the Tax Policy Center. Even during the Reagan administration, the rate did not dip below 40 percent.  

It’s also important to note that the statutory tax rate for corporations tends to radically differ from what they actually pay, after taking various deductions and using other tricks and loopholes.

Am I getting a tax cut?

This one is actually a little bit difficult to answer, because it depends on various factors, including what you make and whether you’re married, what state you live in, whether you’ve got kids, etc. It also depends on what’s in the final, reconciled version of the bill. Below are some articles and resources to help you figure it out:

• “Distributional Effects of The ‘Tax Cuts and Jobs Act’,” Joint Committee on Taxation
• “How the Senate tax bill affects rich and poor, in three charts,” PBS Newshour
• “How 4 different households will fare under the tax bill the Senate passed,” CBS
• “What the Tax Bill Would Look Like for 25,000 Middle-Class Families,” New York Times

Why is there a repeal of the Affordable Care Act’s individual mandate in the tax bill? Why is there an authorization to drill in the Arctic National Wildlife Refuge?

The short answer is: politics. The slightly longer answer is that Republicans, using budget reconciliation rules that allow them to pass legislation with a simple majority (i.e., 51 votes), seized an opportunity to pass years’ long wish-list items.

header image: "mitch mcconnell," gage skidmore / flickr