Senate passes huge tax cuts after last-minute changes; conference with House next

The White House and congressional leaders released a framework for tax changes, but many key details have been left to tax committees. Here’s how that process is working. Jeff Dionise, Ramon Padilla, Paul Singer and Herbert Jackson, USA TODAY

After winning over last-minute holdouts, Senate Republicans early Saturday approved a massive tax overhaul that provides more than $1 trillion in tax cuts over ten years, revamps corporate and individual tax rates, expands some credits and eliminates some popular deductions.

Vice President Pence announced the 51-49 vote came despite howls of protest from Democrats over the rushed process leading up to the vote — major changes were unveiled around 7 p.m., just hours before the final vote — and allegations that the bill overwhelmingly benefits the wealthy.

“I defy any member of the Senate to stand here and take an oath that they have read this and understand what in the world it means to businesses and families and individuals," Sen. Dick Durbin, D-Ill., said holding up what he said was a 479-page bill Democrats had just received, complete with hand-written changes.

President Trump hailed the bill's passage early Saturday, thanking Senate Majority Leader Mitch McConnell and Senate Finance Committee Chairman Orrin Hatch, R-Utah, on Twitter.

"We are one step closer to delivering MASSIVE tax cuts for working families across America," Trump tweeted, adding: "Look forward to signing a final bill before Christmas!"

While a majority of people at every income level will pay less in taxes, there are also many people at every income level who will pay more, especially if they benefited from itemized deductions before, analyses from government and private experts said.

"We’re about to provide tax relief to millions of people in Ohio and around the country," said Sen. Rob Portman, R-Ohio. "Middle-class tax cuts, doubling the standard deduction, doubling the child tax credit, lower rates for people in every bracket. ... People who are making $50,000 a year with two kids to see a 36 percent tax cut, as an example."

The Senate bill has numerous differences with one that passed the House on Nov. 16, which likely means that a joint conference committee will have to iron out an agreement. Both houses have to approve identical bills before Trump can sign it.

Trump has said he wants a bill by Christmas, and Saturday's vote keeps the GOP on that schedule.

The vote also shows Senate Republicans were able to come together to make a deal in a way they could not earlier this year when they tried to repeal and replace the Affordable Care Act, also referred to as Obamacare.

The bill reduces the top corporate tax rate from 35% to 20% starting in 2019, and shifts the taxation of multinational companies from one based on global revenue to domestic revenue. It would let businesses immediately write-off equipment purchases that they previously had to amortize over time.

Sponsors hope both changes will spur business investment and expansion that creates jobs and sparks growth. But on Thursday the official scorekeeper for tax bills threw cold water on the notion that that growth will offset the revenue lost from cutting rates, projecting that the national debt would grow by $1 trillion over the decade even with economic growth.

For individuals, the bill expands the child tax credit and increases the standard deduction next year from $12,700 for couples to $24,000. It also revises tax brackets, allowing people to earn more yet remain at lower tax rates.

At the same time, it eliminates the personal exemption, which this year provides a $4,050 reduction in taxable income for each taxpayer, spouse, and dependent child.

Changes to individual taxes would expire after five years, while the corporate tax changes would be permanent under the bill. Sponsors say they expect future congresses to extend the breaks for individuals, but doing that in the current bill would have violated a budget rule that was used to bring the bill to the floor without Democratic votes.

One last-minute change continued a tax that primarily hits the wealthy that Trump and Republican leaders had pledged to eliminate when the overhaul effort began in earnest this spring. Under the revised bill, the Alternative Minimum Tax would remain with a significantly increased exemption, a change that will raise $133 billion that would be applied to offsetting other tax cuts.

The bill also eliminates the keystone requirement of former president Barack Obama's Affordable Care Act that requires the Internal Revenue Service to fine taxpayers who do not have health insurance. Removing the so-called Obamacare mandate will lead to 13 million fewer people with insurance by 2027, and raise rates for those buying coverage in government-managed exchanges, according to the Congressional Budget Office.