by Mitch Kokai
Senior Political Analyst, John Locke Foundation
As it currently stands, both versions of the bill reduce the corporate tax rate to 20 percent, keep the state and local tax property tax deduction capped to $10,000, move to chained CPI, and apply some primary and secondary education expenses to 529 college savings accounts.
According to the Tax Foundation, the differences involve some modest changes as well as more difficult policy decisions concerning the alternative minimum tax and the taxation of pass-through business income.
The first major difference between the two versions is in regard to individual tax rates and brackets. The House version reduces the number of brackets from seven to four: a 12 percent, 25 percent, 35 percent, and 39.6 percent bracket. The Senate version keeps the current seven brackets, but reduces the rates to 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent, and 38.5 percent.
House Majority Leader Kevin McCarthy (R., Calif.) said he believed those rates could be worked out, and he would like to see rates go even lower if possible.
Another difference between the bills concerns modest changes in the amount for the standard deduction. The House would gives singles a standard deduction of $12,200, while the Senate would give $12,000. Households and joint filers would get a standard deduction of $18,300 and $24,400 in the House version, respectively, while getting $18,000 and $24,000 in the Senate version.
Under the House plan, the child tax credit would be increased to $1,600 and would phase out for joint filers at $230,000. A new $300 tax credit would be given to families who are not eligible for a child tax credit, and this would expire after five years. The Senate version would increase the child tax credit to $2,000 and after earning $500,000 for joint filers, would phase out. These provisions would stop in year 2025.