The Senate Finance Committee is drawing up its own version of a tax bill which includes major differences from the House bill on such issues as deducting state and local taxes. The Senate would eliminate all state and local tax deductions while the House bill would permit Americans to deduct as much as $10,000 annually in property taxes.
In an interview Thursday on Bloomberg TV, Sen. Rob Portman, R-Ohio, predicted when the House and Senate reconcile the differences in their bills, the $10,000 cap on property taxes “is probably where this ends up.”
All members of the Ohio congressional delegation voted along party lines, with the 12 Republicans supporting the bill and the four Democrats opposed.
In a statement moments after the vote, Republican Rep. Pat Tiberi of suburban Columbus said, “This is an historic effort. Today, the House did its job. Next, the Senate must do theirs. We cannot let this once-in-a-generation opportunity go to waste.”
But Rep. Joyce Beatty, D-Columbus, referred to the measure as the “short-sighted Republican tax scam bill,” and said she stood with “seniors, veterans, students, teachers and countless families” in voting against it.
House Republicans have been under intense pressure to approve a bill that reduces tax rates and simplifies the tax code. They have been warned by their pollsters that if they fail to produce a tax bill, they could lose the House in next year’s elections.
Former House Speaker John Boehner, R-West Chester Twp., said he has not “seen congressional Republicans this determined to get something done in years. There is still a lot of work ahead. But I think they can do this. And if they do it, it will be good for the economy.”
The drawback is Republicans who so sharply criticized rising debt during the presidency of Barack Obama are now willing to tolerate debt loads not seen since the end of World War II.
Referring to the potential impact on the national debt, House Minority Leader Nancy Pelosi, D-Calif., asked, “Oh where oh where are the deficit hawks?”
According to the non-partisan Congressional Budget Office, under current law and assuming tax rates do not change, the federal government is expected to add nearly $10 trillion to the nation’s publicly held debt — money owed through the sale of treasury bonds and other notes to private and public investors. The Republican bill could add to that total.
Portman and other Republicans have argued that reducing taxes, particularly on companies, will expand economic growth, raise wages and increase tax receipts to the federal government.
But when Republicans reduced taxes in 1981 and 2001, the budget deficit soared. By 1983, the federal deficit had risen to $207 billion compared to $40.7 billion in 1979. In the aftermath of the 2001 tax cut – combined with the economic downturn exacerbated by the 2001 terrorist attacks – the government surplus of $128 billion of 2001 was transformed into a $377 billion deficit in 2003.
The House bill reduces the number of income brackets for individuals from seven to four — 12 percent, 25 percent, 35 percent and 39.6 percent. The 39.6 percent bracket would include American households with an annual income of $1 million or more.
The measure also slashes the corporate income tax rate from 35 percent to 20 percent and reduces taxes on many small businesses to 25 percent.
Also included is an increase in the per-child tax credit from $1,000 to $1,600. But the bill scraps the $4,050 personal exemption that Americans can take for every member of their household.
Republicans say they want to simplify tax returns by increasing the standard deduction, which is the amount people who don’t itemize can deduct from their income.
The bill would roughly double the standard deduction to $24,000 a year for married taxpayers and $12,000 for those who are single filers. Currently, the standard deduction is $12,700 for married couples filing jointly and $6,350 for single taxpayers.
If Americans choose the new higher standard deduction, they could not take deductions such as home mortgage interest, charitable contributions or medical expenses.
Michael Dulman of the Washington Bureau contributed to this story.