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| What we know – and don't know – about the Republican tax plan | |
| (about 1 hour later) | |
| Donald Trump’s $1.5tn plan to overhaul the US tax system received another blow on Tuesday night when Democrat Doug Jones emerged as the winner in a closely fought race for a Senate seat in Alabama. | Donald Trump’s $1.5tn plan to overhaul the US tax system received another blow on Tuesday night when Democrat Doug Jones emerged as the winner in a closely fought race for a Senate seat in Alabama. |
| Now Trump is set to make another pitch for the unpopular plans while Republicans rush to get their bill finalized before the New Year, when Jones goes to Washington. His vote could imperil the bill’s passage. | Now Trump is set to make another pitch for the unpopular plans while Republicans rush to get their bill finalized before the New Year, when Jones goes to Washington. His vote could imperil the bill’s passage. |
| By the end of this week Republicans hope to have finalized a tax plan Trump has said will “create a new age of American prosperity” and which critics, including Bernie Sanders, have called a hand-out for the super-rich and “one of the greatest robberies in American history”. | By the end of this week Republicans hope to have finalized a tax plan Trump has said will “create a new age of American prosperity” and which critics, including Bernie Sanders, have called a hand-out for the super-rich and “one of the greatest robberies in American history”. |
| Despite the fact that the bill will likely add $1tn plus to the national debt, much of the work on the plan has been done in locked rooms. There are two bills, one in the House and one in the Senate, and the exact shape of the final plan are unknown and subject to change. But odds are some sort of plan will pass before Christmas. So what do we know? | Despite the fact that the bill will likely add $1tn plus to the national debt, much of the work on the plan has been done in locked rooms. There are two bills, one in the House and one in the Senate, and the exact shape of the final plan are unknown and subject to change. But odds are some sort of plan will pass before Christmas. So what do we know? |
| The two bills | The two bills |
| The House passed its budget bill on 16 November and the Senate passed its bill on 1 December. Both bills contain key elements of Trump’s plan: for instance, cutting corporate taxes to 20%, from 35%. There are, however, key differences between the two plans that could still derail – or at least delay – reconciling the plans. | The House passed its budget bill on 16 November and the Senate passed its bill on 1 December. Both bills contain key elements of Trump’s plan: for instance, cutting corporate taxes to 20%, from 35%. There are, however, key differences between the two plans that could still derail – or at least delay – reconciling the plans. |
| The House bill | The House bill |
| The House bill permanently cuts the number of income tax brackets from seven to four. | The House bill permanently cuts the number of income tax brackets from seven to four. |
| Deductions on mortgage interest would be capped at $500,000 (rather than the current $1m). | Deductions on mortgage interest would be capped at $500,000 (rather than the current $1m). |
| Tax deductions for those with high medical expenses would be cut, a provision that will disproportionately hit the elderly and has been attacked by AARP, the powerful lobby group for older Americans. | Tax deductions for those with high medical expenses would be cut, a provision that will disproportionately hit the elderly and has been attacked by AARP, the powerful lobby group for older Americans. |
| The House bill would also repeals the Alternative Minimum Tax (AMT), a tax applied to the very top earners to force those who use other accounting loopholes to pay little or no tax. | The House bill would also repeals the Alternative Minimum Tax (AMT), a tax applied to the very top earners to force those who use other accounting loopholes to pay little or no tax. |
| The Senate bill | The Senate bill |
| The Senate bill has seven new tax brackets but they expire in 2025. | The Senate bill has seven new tax brackets but they expire in 2025. |
| It would leave mortgage deductions as they are and expands medical deductions. | It would leave mortgage deductions as they are and expands medical deductions. |
| The Senate also keeps AMT, which leaked documents show triggered $38m in taxes for Trump in 2005. But it would ensure fewer people pay it. | The Senate also keeps AMT, which leaked documents show triggered $38m in taxes for Trump in 2005. But it would ensure fewer people pay it. |
| There are also key differences on changes to pass through – businesses that are taxed at the individual owner’s tax rate and not the corporate tax rate, estate taxes and the treatment of state and local taxes. | There are also key differences on changes to pass through – businesses that are taxed at the individual owner’s tax rate and not the corporate tax rate, estate taxes and the treatment of state and local taxes. |
| What next? | What next? |
| On Wednesday Trump addressed the nation as Republicans made a final push to get the tax bill passed. Party leaders met over the weekend to iron out difficulties and appear to have addressed major differences. Lawmakers met Wednesday for the first, and perhaps only, open meeting of a conference committee tasked with reconciling the bills. The plan is not yet public but compromises have been made on cuts to the corporate tax rate (now expected to be 21%) and the deduction of state and local taxes. | |
| The vote | The vote |
| Republicans are using budget rules to pass the tax bill without Democrat support. The House bill passed with 227 Republicans voting yes and 13 voting no. No Democrats voted for the bill. The Senate bill passed 51 to 49, with only one Republican, senator Bob Corker, holding out over the cost. | Republicans are using budget rules to pass the tax bill without Democrat support. The House bill passed with 227 Republicans voting yes and 13 voting no. No Democrats voted for the bill. The Senate bill passed 51 to 49, with only one Republican, senator Bob Corker, holding out over the cost. |
| Republicans have control of both houses but Republican politicians in Democratic states are furious about plans to cut deductions for state and local taxes, and others are holding out for once-in-a-lifetime deals as pressure mounts. The final bill can afford to lose just 20 votes in the House and two in the Senate now and just one when Jones takes his seat. So negotiations are fraught to say the least. | Republicans have control of both houses but Republican politicians in Democratic states are furious about plans to cut deductions for state and local taxes, and others are holding out for once-in-a-lifetime deals as pressure mounts. The final bill can afford to lose just 20 votes in the House and two in the Senate now and just one when Jones takes his seat. So negotiations are fraught to say the least. |
| While Trump has had major successes in slashing regulation and appointing right-wing judges, he has failed to dismantle Obamacare and the Republicans believe passing tax reform is a must for their agenda as they move into 2018 and mid-term elections. Failure to pass a tax bill by Christmas would be a terrible end to Trump’s first year in office. | While Trump has had major successes in slashing regulation and appointing right-wing judges, he has failed to dismantle Obamacare and the Republicans believe passing tax reform is a must for their agenda as they move into 2018 and mid-term elections. Failure to pass a tax bill by Christmas would be a terrible end to Trump’s first year in office. |