U.S. House passes sweeping tax reform measure with all Democrats opposed

Nov. 16--WASHINGTON -- The U.S. House passed a sweeping tax reform measure Thursday that would simplify income tax brackets, reduce corporate taxes and make many other changes as well.

The measure passed 227-205 on what was a largely a party-line vote, with all Democrats opposed to the Republican-led bill. Thirteen Republicans voted against the legislation.

All of Michigan's nine Republican members voted for the legislation; the state's five Democrats voted against.

With Congress ready to leave the nation's capital for Thanksgiving break, the House bill now goes to the Senate, where Republican leaders are looking at a tax measure that is similar but includes some significant differences to be worked out.

A vote on the Senate proposal is not expected until December.

Just before the House vote was called Thursday afternoon on what could be the biggest set of tax changes for American businesses and individuals in more than three decades, House Speaker Paul Ryan said the motivation for the legislation was simple: to put more money in the pockets of taxpayers.

"We say keep your money," he said. "It's your money. Do what you want with it."

But Democrats argued that for all the Republican claims that most Americans will see a tax break under the bill, the largest gains still go to the wealthiest taxpayers and that millions of citizens will see their taxes go up, not down, because of the changes affecting numerous deductions that are currently allowed.

"The Republican tax bill is built on massive deception," U.S. Rep. Sander Levin, D-Royal Oak, and a former chairman of the tax-writing Ways and Means Committee, said on the House floor during debate, citing an analysis showing 1 of 4 taxpayers making between $50,000 and $100,000 would be paying higher taxes in 2023.

With Republicans still searching for a major win in this Congress -- even though the party is in control of both chambers and the White House -- there was little chance the measure would be defeated in the House, though it still faces hurdles in the Senate.

"It's time to unleash our economy's fullest potential. Passing our bill in the House is a major step in this process, and we know our work does not end here. It's been 31 years since our last major overhaul, but today, we're telling America that we're ready to deliver real relief -- and soon," said U.S. Rep. Mike Bishop, R-Rochester, who is also a member of the Ways and Means Committee.

Michigan members of Congress quickly blasted out e-mails after the vote either praising the legislation or chastising it, depending on which side of the political divide they sat.

Outside analyses of the legislation suggest it could create tens of thousands of jobs in Michigan and put thousands of dollars in the pockets of middle-class Michiganders over the next decade, but that will largely depend on personal circumstances and whether personal spending, business decisions and market growth track expectations.

Outside estimates suggest that all income groups would see some reduction in their tax bills under the House plan, though that could change for individuals -- especially those in middle-class brackets -- as some of the measure's aspects would be set to expire in years to come.

The Congressional Budget Office has estimated that the tax reform measure could increase the nation's deficit by $1.7 trillion over a decade -- though Republicans have argued that undersells the true level of growth in wages and employment it will spark.

Among other aspects, the 440-page tax reform measure:

* Gets rid of the seven income tax brackets in use now in favor of four --12%, 25%, 35% and 39.6% -- with most earners seeing a tax cut.

* Nearly doubles the standard deduction while eliminating the personal exemption.

* Increases the child tax credit from $1,000 to $1,600 and allows for a higher level of income ($115,000 for single filers, $230,000 for married couples) before it begins phasing out.

* Doubles the current exemption on the estate tax to $10 million.

* Maintains the mortgage interest deduction on homes but limits it to interest on the first $500,000 borrowed for new primary homes. Home equity loans and second homes would no longer qualify.

* Allows for up to $10,000 in local property taxes to be itemized as deductions but no deduction for state and local income taxes. Student loan interest and medical expenses would also no longer be allowed to be deducted. A tax credit for adoption expenses would still be allowed.

* Eliminates tax credit of up to $7,500 for purchase of plug-in electric vehicles

* Reduces the top corporate income tax rate from 35% to 20%.

The Senate's version includes several differences, including one that would sunset the income tax breaks in a decade and remove the individual mandate that Americans purchase health insurance as part of the 2010 Affordable Care Act. On Thursday, the staff of the nonpartisan Joint Committee on Taxation presented a report indicating that taxpayers earning less than $75,000 could see some tax increase by 2027, though Republicans disputed that.

The Washington-based Tax Foundation, an independent group, said it expects the House plan, if enacted, to create about 890,000 jobs and increase after-tax income for middle-income earners by about $2,200 over 10 years. In Michigan, it said as many as 26,625 jobs could be created with after-tax income growing by $2,169.

The Tax Policy Center, a Washington-based partnership between the Urban Institute and the Brookings Institution, said in its analysis that while the House bill would reduce taxes on average for all income groups between 2018 and 2027, "the largest cuts, in dollars and as a percentage of after-tax income, would accrue to higher-income households."

It also noted that at least 7% of all taxpayers would pay higher taxes under the plan next year if it were enacted and at least 24% would pay more in 2027, with several of the tax breaks set to expire.

Contact Todd Spangler: 703-854-8947 or [email protected]. Follow him on Twitter at @tsspangler.

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