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1 1 (October 4, 2018)

handle is hein.crs/govchvz0001 and id is 1 raw text is: FF . : ri , -'-'. r h ,. , Updated October 4, 2018 Tax Reform 2.0: The Ways and Means Tax Proposals The Ways and Means Committee, on September 13, 2018, approved three tax bills. H.R. 6760, the Protecting Family and Small Business Tax Cuts Act of 2018, would make the individual tax cuts in the 2017 tax revision (commonly referred to as the Tax Cuts and Jobs Act) permanent. H.R. 6757, the Family Savings Act of 2018, would expand tax benefits for savings and make other modifications to retirement plans. H.R. 6756, the American Innovation Act of 2018, would provide tax benefits for start-up businesses. The last two bills were approved in the House on September 27, 2018, and the first on September 28, 2018. '\,d- - Tax C u's Nermnent, H,,L, 6760 The most significant bill, measured by budgetary impact, would make the expiring provisions relating to individual tax revisions, including the deduction for pass-through businesses taxed under the individual tax, permanent. These provisions are explained in CRS Report R45092, The 2017 Tax Revision (P.L. 115-97): Comparison to 2017 Tax Law, coordinated by Molly F. Sherlock and Donald J. Marples. When the 2017 tax revision was adopted, a number of provisions in the bill were enacted on a temporary basis. If those provisions had been enacted on a permanent basis, the cost would have exceed the $1.5 trillion cost allowed under reconciliation in the Senate. Provisions relating to corporations, the international tax system, and a variety of provisions relating to business deductions were enacted on a permanent basis, whereas most of the provisions relating to individuals are set to expire after 2025. The Joint Committee on Taxation estimated that making these provisions permanent would cost $631 billion for FY2019-FY2028. Since the costs largely occur in the last three years, the cost would be significantly larger in the future. If the cost grows by 5% a year, over the following 10 years (FY2029-FY2038), it will increase the deficit by $4 trillion, not including interest costs. There are four major elements of the individual provisions in the 2017 tax revision that are made permanent by H.R. 6760: (1) the rate reductions and other structural changes, (2) the limits on deductions including the $10,000 cap on itemized deductions for state and local taxes (SALT), (3) the deduction for pass-through businesses taxed under the individual tax along with a limitation on their loss deductions, and (4) the increased exemption for the alternative minimum tax. There are also some other provisions including an increase in the exemption for the estate tax. The revenue estimates for H.R. 6760 discussed below are for FY2019-FY2028, but as they generally reflect extensions after 2025, are estimates for a three-year effect. These provisions included the new rate structure that featured slightly lower tax rates, the increase in the standard deduction and child and dependent credits, and the repeal of personal exemptions. The new rates were slightly lower with the top rate reduced from 39.6% to 37%. The rate reductions were projected to cost $522 billion. The increased standard deduction generally offset the loss of personal exemptions for taxpayers, and the increased child tax credits generally offset the loss of dependent exemption, for a small combined loss of slightly over $20 billion. Th.,, $ 0,000 S.ALT Cap and Oth'r ,e',,ick m,' <.' D'N' k~o ' l' 'x k i''n The original bill temporarily eliminated some itemized deductions and restricted others. The most significant of these in revenue terms was a $10,000 cap on the amount of state and local taxes that could be deducted. There was also a lower $750,000 cap on mortgage debt eligible for interest deductions and an elimination of interest deductions for certain home equity loans, elimination of most casualty loss deductions and miscellaneous expenses, an increase in the income limit on charitable deductions, and a repeal of the overall limit on itemized deductions. These provisions together would gain $318 billion in revenue if made permanent. The bill would also make permanent the inclusion of employer provided moving expenses in income ($2 billion) and repeal the deduction for moving expenses ($3 billion), except for members of the Armed Forces. It would permanently repeal the exclusion for employer-provided bicycle commuter fringe benefits and limit the deduction of wagering losses, at a negligible revenue cost. H.R. 6760 would extend a reduction in the floor for itemized deductions for medical expenses, expiring in 2018, for two years, at a cost of $3.9 billion. LCn' tC~kl on Businesses taxed under the individual rather than corporate tax, including sole proprietorships, partnerships, and Subchapter S corporations that elect to be taxed on a partnership basis were allowed a deduction of 20% of qualified pass-through income. For high-income individuals, the deduction is limited to the greater of 50% of wages paid, or 25% of wages paid plus 2.5% of depreciable property. Certain service businesses are not eligible for high-income individuals. Making the pass- 'O 'T mppm qq\ a ' p\w -- ' gn'a', I 'S 11LIANJILiN,

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