- Senate Republicans released modifications to their massive tax bill on Tuesday night.
- The biggest proposed change: Individual tax cuts would sunset after 2025.
- The bill would also repeal the Affordable Care Act’s so-called individual mandate.
Senate Republicans released a massive heap of changes to their tax bill Tuesday night, including tweaks to proposed individual tax cuts and to the way startup employees get paid.
Sen. Orrin Hatch, the Republican chair of the Senate Finance Committee, released a new version of the legislation that, significantly, would sunset individual tax cuts after 2025. That means the proposed tax cuts for Americans would end in 2026, after which the tax brackets would revert to today’s levels absent new legislation from Congress.
Other changes to the individual side of taxes, like the repeal of the alternative minimum tax and the increased standard deduction, would also expire after 2025.
While the individual changes would be temporary, cuts to the corporate tax rate would be permanent in the bill. Hatch said in a statement accompanying the updated bill that the bill aimed to provide certainty for American businesses.
“Additionally, the modified mark creates more permanence in our tax system so that American job creators can invest in the long term, grow their business, and create new jobs,” Hatch said.
Obamacare changes and more
The legislation also would repeal the Affordable Care Act’s so-called individual mandate, eliminating the tax penalty for not carrying health insurance. According to an estimate by the nonpartisan Congressional Budget Office, the move would erase $338 billion from the federal budget deficit over 10 years. It would also cause a serious shake-up in the individual insurance market, leaving a projected 13 million more people without health coverage in 2027 compared with the current system, according to the CBO.
The provisions to make the individual tax cuts temporary and to repeal Obamacare’s individual mandate will surely meet tough resistance from Democrats. They could even complicate the math for Republicans to get the 50 Senate votes they need on the bill.
Here’s a rundown of some of the other major changes in the updated Senate legislation:
- Adjustments to individual tax brackets: The updated bill slightly adjusts the income levels for each tax bracket, though all of these changes would sunset after 2025. The new brackets are:
- 10%: $0 to $9,525 of taxable income for an individual; $0 to $19,050 for married joint filers.
- 12%: $9,526 to $38,700 individual; $19,051 to $77,400 joint.
- 22%: $38,701 to $70,000 individual; $77,401 to $140,000 joint (was 22.5% in original Senate bill).
- 24%: $70,001 to $160,000 individual; $140,001 to $320,000 joint (was 25% in original Senate bill).
- 32%: $160,001 to $200,000 individual; $320,001 to $400,000 joint (was 32.5% in the original Senate bill).
- 35%: $200,001 to $500,000 individual; $400,001 to $1,000,000 joint.
- 38.5%: over $500,000 individual; over $1,000,000 joint.
- Increasing the size of the child tax credit: The new credit would be $2,000 a child, up from $1,650 in the original Senate bill and $1,000 currently. This came amid a push from Sens. Marco Rubio and Mike Lee, both Republicans.
- Elimination of changes from the original bill to stock compensation: The original Senate bill included a provision that would have taxed employee stock options when they vested instead of when they were exercised. That proposal is not included the updated version of the bill after an uproar from Silicon Valley, where stock-based compensation is popular.
- Easing restrictions on pass-through income: The Senate bill has a 17.4% deduction for income made from a pass-through entity, in which the owner of the company books the firm’s profits as his or her own income. The new update includes changes to loosen the requirements to qualify for the deduction.