With massive GOP tax package nearly law, what happens now?
By MARCY GORDON
AP business writer
Cue the accountants – and the IRS rule-writers – the massive Republican tax package is nearly a done deal, soon to become law.
After weeks of drafting, fierce lobbying, horse-trading and cliffhangers from some holdout GOP senators, all that’s left is the voting and President Donald Trump’s signature. This week Republicans in the House and Senate will whisk through the sweeping $1.5 trillion GOP legislation on party-line votes. Trump signs it with what’s likely to be an elaborate White House ceremony.
The legislation permanently slashes the tax rate for corporations from 35 percent to 21 percent and reduces levies on the wealthiest Americans, while making more modest tax reductions for most others. The tax cuts for individuals are temporary, expiring in 2026. It doubles the standard deduction used by most Americans, to $24,000 for married couples, also ending in eight years.
The new law kicks in Jan. 1. It will bring the biggest overhaul of the U.S. tax code in three decades, reaching into every corner of American society and the economy. It will give Trump and the Republicans their first major legislative achievement and political insurance, as they see it, to hold on to their majorities in next year’s elections.
A look at how this unfolds and when taxpayers will be affected:
WHEN ARE THEY VOTING?
Now that concerns of holdout Republican senators such as Marco Rubio of Florida and Susan Collins of Maine have been met, Senate approval of the package is buttoned up. The Republicans’ razor-thin margin in the 52-48 Senate left them only two votes to spare, setting off frantic last-minute negotiations behind closed doors last week. Now, even with Sen. John McCain, R-Ariz., recuperating from cancer treatment in Arizona and unable to vote, the Republicans still can muster a simple majority of the 99 senators present. And in their back pocket, they’ve got Vice President Mike Pence ready to break a tie if needed.
Still taking no chances, Republican leaders are using strategic maneuvers. They’ve set the vote in the House first, expected this afternoon, followed by technical termination of the joint House-Senate conference committee that blended the separate bills into a compromise package. That means when the Senate votes – likely this evening – Democrats will be unable to force a series of votes on a so-called “motion to recommit” the bill to the conference committee. The committee won’t exist, so no delay.
No Democrats are expected to vote for the legislation in the Senate. Thirteen House Republicans voted against the House bill last month, all but one from high-tax California, New York and New Jersey in protest of reduced deductions for state and local taxes. But the math clearly will carry the package through Congress.
A HUGE CELEBRATION IS LIKELY
After final passage, the legislation goes to an eagerly awaiting president. Trump made boosting economic growth – with a shot of adrenaline to come from cutting corporate taxes – a centerpiece of his presidential campaign. He predicted this weekend that with the tax overhaul, growth could jump from the current 3 percent to “4, 5 and maybe even 6 percent ultimately.”
Many economists doubt that even a sustained 4 percent rate is achievable. And they’ve mostly thrown cold water on Trump’s prediction that the tax changes will put an additional $6,000 a year into the pockets of an average family of four.
Trump continues to push back against criticism that the legislation will benefit corporations and wealthy Americans – including the president, his family and big GOP donors – more than the middle class.
SOME PROMPT CHANGES
Once Trump signs the tax plan into law, it takes effect Jan. 1. Employees could start seeing changes in the amount of taxes withheld from their paychecks – hopefully mostly reductions – as early as February. The IRS says it’s taking initial steps to prepare withholding guidance for employers, which it expects to issue next month.
But taxpayers won’t file their 2018 returns until the following year, in accordance with normal procedure. That’s too late for taxpayers to have refunds in hand, or checks paid to the IRS, under the new law before they vote in the midterm elections next year. The Democrats’ continuous objections this year – that the tax legislation is tilted toward corporations and the wealthy – will morph into campaign ads in 2018.
For corporations, the tax cuts take effect in January, allowing companies to immediately write off the full cost of capital investments.
A BOON FOR TAX LAWYERS
The legislation was intended to simplify the tax process, and Republican leaders have waved a short, postcard-like form that they say most taxpayers will be able to use to file their returns. But instead of closing loopholes, the tax plan appears to create more of them. Tax lawyers and accountants are set to be besieged by clients looking for professional guidance in restructuring companies and incomes to avoid taxes.