Revised Senate GOP tax reform bill ends many tax cuts after 2025

Republicans in the U.S. Senate unveiled a series of last minute changes to their tax reform plan late on Tuesday night, ending all plans for individual tax cuts after eight years, while making almost all of the proposed business tax changes permanent, as GOP leaders expressed confidence that they can push a bill through the House by Thursday, and win Senate approval of a slightly different plan soon after Thanksgiving.

As for the newly revised Senate tax reform bill, here is the link to the summary of the revised Senate tax reform bill.

And for true tax policy wonks, here is the link to the detailed budgetary score of the revised Senate plan.

Now let’s go through some of the changes in the bill:

1. The individual tax cuts are not permanent. In an effort to squeeze more tax relief into the 10 year GOP plan, Republicans decided to ‘sunset’ most of the individual tax cuts after the end of 2025 – in other words, in 2026, these tax cuts would snap back to current tax law right now – if nothing is done by the Congress. This is basically a scoring gimmick by the GOP to make sure that the tax plan does not go over a cost of $1.5 trillion over 10 years. Remember the Fiscal Cliff with the end of the Bush tax cuts in 2013? This is the same thing. 26 different individual provisions would have an eight year time limit, while only four business tax provisions would end early. The business tax cuts are permanent. The individual tax cuts are not. Here’s just a few examples of what would end for individuals on December 31, 2025. (I might get to spend another New Year’s Eve at the U.S. Capitol.)




2. The Senate plan knocks out the individual mandate – in 2019. One of the late changes from Senate Republicans deals with the Obama health law, as the new Senate language would zero out the tax penalty that is levied against people who do not buy health insurance, as required by the individual mandate under Obamacare. But the fine print of the new Senate plan shows that the end of that tax penalty would not take place immediately, as the effective date is after the end of 2018. This provision gives Republicans an extra $318 billion in budget savings, which helps to bring the Senate plan under the $1.5 trillion that can be added to the deficit by the tax reform bill.

3. Tax breaks for individuals get off to a slow start. Of the $886 billion in individual tax relief in this bill, just $49.4 billion comes in 2018, the first year of the revised Senate tax proposal. That’s just 5.5 percent of the overall tax cuts in year number one of this tax cut plan. That is much like the House tax reform bill, where just $52.5 billion of the plan’s $964 billion in individual tax relief comes in 2018.




4. The Senate plan allows college funds for unborn children. Mirroring a provision in the House tax reform bill, the Senate plan would now allow the establishment of a 529 college savings plan for a child in utero.




5. Beer and alcohol interests win new provisions. One of the few special provisions aimed at one specific group to pop up in the GOP tax reform effort surfaced on Tuesday night in the Senate bill, with a series of provisions under the nondescript heading of “CRAFT Beverage Modernization.” Beer would see a reduced excise tax, as would certain wines and distilled spirits. But it’s just a temporary booze tax provision that expires after the end of 2019, costing $4.2 billion. It appears that the details come from a bill sponsored by Sen. Ron Wyden (D-OR).



6. Teachers win in the Senate revised bill. Many in both parties have not been happy with the provision in the House bill, which ends a popular tax deduction for teachers, allowing them to deduct some of the money they spend on supplies for their classrooms. That above-the-line deduction for teachers is only $250, but it is a very popular item. The Senate bill not only keeps that deduction for teachers, but doubles it to $500. This may be a signal to the House that the Senate will not accept the end of this deduction.

We will hear more about these revisions on Wednesday morning, when the Senate Finance Committee reconvenes.

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