Many may remember the classic song “I’m Just a Bill” from Schoolhouse Rock!; it’s one of my favorites. It does a great job of explaining the legislative process. But if I were the writer of that catchy tune I would amend the chorus slightly:
“I’m just a bill. Yes I’m only a bill,
And I was rushed into Capitol Hill.
Well, now I’m back in committee
Because Congress violated some rules trying to claim a victory.”
It’s hardly a surprise that the leading party would try to rush a bill into law—both parties do it. This process cost Congress some time in their efforts to pass the Tax Cuts and Jobs Act. After the bill was debated in committee it passed for a second time in the House, but violated some budget rules and was edited and sent back for another final vote on December 20th. With this process, it’s easy to get confused about where the bill stands and what provisions remain. So I’m sure you have questions.
These bills are written in ways that make it difficult for many of us to understand or have any interest in reading. Luckily, our team of dedicated Key Votes researchers and advisors read every page of these bills and highlight the facts that impact you, so that you can continue your research from there.
This piece is not an analysis of every aspect of the the bill but outlines some of the major questions you may have. It also provides some context on why members of Congress did or did not support the bill, or certain aspects of it, thanks to our database of over 1.2 million statements. While we always encourage voters to read the bill text, we hope that this piece, and the work of our researchers, gives you enough information so that you don’t have to.
What's next for this bill?
The U.S. House of Representatives and Senate voted on their initial versions of the first Tax Cuts and Jobs Act earlier this year; however, the differences in these bills required that both chambers come together to finalize and pass the bill in conference committee. It then moved on to the President's desk, he signed it into law on December 22.
When would it go into effect?
If signed by the President, most of the bill would go into effect on January 1, 2018. Many of the tax cuts and incentives are set to expire on December 31, 2025, and would then reset to the current law. Most of the changes in corporate taxes would be permanent.
How did my senators and representatives vote?
If your senators are Republicans, they voted in favor of the bill. If they are Democrats or Independent, they voted against it. This was the case throughout the entire process—the only exception is Robert Corker of Tennessee, who was the sole Republican senator who voted against the earlier version of the bill. In a statement on the day prior to the vote, he stated:
"This is yet another tough vote. I am disappointed. I wanted to get to yes. But at the end of the day, I am not able to cast aside my fiscal concerns and vote for legislation that I believe... could deepen the debt burden on future generations.”
He ultimately voted in favor of the final version, stating:
“After great thought and consideration, I believe that this once-in-a-generation opportunity to make U.S. businesses domestically more productive and internationally more competitive is one we should not miss.”
To see the full vote breakdown for the final Senate vote of the Tax Cuts and Jobs Act, click here.
The House saw a larger split, with 12 Republicans voting against it. See the vote breakdown of the final vote in the House here. You can also browse statements from your representatives on the tax bill here.
How could I be affected by the tax bill?
If you are human:
The Affordable Care Act individual mandate penalty would be repealed.
“the #GOPTaxScam's repeal of the ACA's individual mandate is opposed by 12 major, national, patient advocacy groups because it puts affordable care in jeopardy,” Sen. Chuck Schumer (D-NY)
“By effectively repealing the regressive Obamacare individual mandate tax, we are putting Americans in charge of their health care and giving them the freedom to choose the best coverage for themselves and their families," Sen. Orrin Hatch (R-UT)
New federal income tax brackets could affect your tax rate. See the Table below to compare the net change in your income tax rate.
“[The bill] lowers the individual tax rates for middle-income Americans so they can keep more of their hard-earned money,” Sen. Deb Fischer (R-NE)
“This bill will provide 62 percent of the benefits to the top 1 percent and at the end of 10 years increase taxes on 87 million middle class households – half of the families making $200,000 a year or less,” Sen. Bernie Sanders (I-VT)
Inflation would be indexed using Chained CPI, which could affect the value of your deductions and credits.
The bill would double the child tax credit to $2,000—$1,400 of which will be fully refundable—and would increase the salary threshold for qualified families.
The bill would introduce a temporary $500 credit for non-child dependents such as a child 17 or older or a family member under the filer’s care.
The bill would raise the exemption on estate taxes of up to $10 million (previously $5 million).
Deductions on State and Local Taxes (SALT) not paid or accrued in a trade or business would be capped at $10,000.
“One of the largest tax increases in the bill comes from repealing the deduction for state and local taxes. This means double-taxation for the more than 100 million Americans... Businesses can still deduct many of their state and local taxes under the bill, even though middle-class families cannot,” Sen. Chris Van Hollen, Jr. (D-MD)
“What the CBO, Joint Tax, and all the other analysis says is that the average taxpayer in every income group gets a tax cut . . . the purpose of this is to cut taxes for everybody, and so we want to keep doing that and we know that this SALT fix is really necessary to make sure that that's the case," Rep. Paul Ryan (R-WI)
The mortgage interest deduction for existing mortgages would decrease to $750,000.
The bill would increase the tax deduction to 20% on qualified pass-through business income for business owners in a sole-proprietorship, partnership, or S-Corporation.
“[The bill increases] the tax deduction for qualified pass-through income, which reduces the tax burden for small businesses set up as a partnerships or pass-through entities.” Sen. John Hoeven (R-ND)
“Latest changes to the pass-through rate will help -you guessed it- ‘the top 1 percent of American earners,’” Sen. Chuck Schumer (D-NY)
Settlement fees from non-disclosure agreements paid in connection with sexual harassment or sexual abuse would not be deductible.
Alimony paid would no longer be a deductible expense, and the individual receiving the alimony would no longer pay taxes on the income for divorces made or modified after December 31, 2018.
Deductions would be authorized for medical expenses exceeding 7.5% of an individual’s adjusted gross income in 2018 and 2019, a threshold that would rise to 10% in 2020.
Graduate students would be able to exempt tuition waivers from their tax liability.
Eliminated deductions would include interest paid on home equity loans or second mortgages, most personal casualty losses not occuring during a qualified natural disaster, bicycle commuting reimbursements, and moving expenses.
The Alternative Minimum Tax (AMT), the federal tax system designed to prevent wealthy taxpayers from using loopholes to avoid paying taxes, would remain intact, but with a higher exemption amount.
Parents would be authorized to use a special tax-free (529) college savings account to pay tuition for private K-12 schools.
After December 31, 2017, individuals would be unable to undo Roth IRA Conversions.
The $3,000 deduction for travel expenses like meals and lodging incurred by members of Congress would be repealed.
Change in Income Tax Bracket Rates based on GOP Proposed Tax Brackets*
*Note: The Net Change in Tax Bracket Rate is not the total change in the amount of taxes a household will pay but the change in the percentage assigned by the Tax Bracket. For example, the total amount of taxes for an individual with income of $9,326 will not decrease by 5%; it would actually decrease by 33.3%—5% of the 15% tax rate.
If you are a business or school:
The corporate tax rate would be cut from 35% to a flat 21%.
"When we take our tax rates, the corporate rates from one of the highest in the world to now one of the lower tax rates in the world, we have a global economy, money will come rushing into the United States to invest here,” Sen. John Barrasso (R-WY)
“I am extremely disappointed that my Republican colleagues passed a bill that non-partisan experts have shown will raise taxes on millions of hard-working families, increase health care premiums by 10 percent annually, and add $1.5 trillion to the national debt - all to give tax cuts to corporate special interests and the wealthiest few,” Sen. Maggie Hassan (D-NH)
A 1.4% excise tax on investment income for certain private colleges and universities would be created.
The corporate Alternative Minimum Tax (AMT) would be repealed.
Oil drilling in the Arctic National Wildlife Refuge (ANWR) would be authorized.
"I also strongly oppose language in the legislation that will cause significant harm to one of the Crown Jewels of the United States, the Arctic National Wildlife Refuge, by opening the entire 1.5-million-acre Coastal Plain to oil and gas development and effectively turning it into a petroleum reserve,” Sen. Chris Van Hollen, Jr. (D-MD)
“The legislation includes language to advance American energy security by opening up a small section of the Arctic National Wildlife Refuge (ANWR) for potential oil and gas exploration... while the ANWR region is the size of South Carolina, the potential area for oil exploration included in the bill is smaller than the airport in Fargo, North Dakota,.” Sen. Mike Enzi (R-WY)
The Employer Credit for Paid Leave would give employers a tax credit for paid family and medical leave, set to expire in December of 2019.
The foreign-source portion of stock dividends received would be exempt from U.S. taxes under certain conditions, shifting closer to a territorial tax system.
Revenue from offshore energy production for the Gulf Coast in 2020 and 2021 would be increased.
How does the final bill differ from the House and Senate versions?
The bills passed in the House and Senate were very different. Because of this, the chambers negotiated their differences before the final vote. Ultimately, the final version resembled the Senate bill much more than the House version. Below are items included in the House or Senate bills but excluded or amended in the final version of the Tax Cuts and Jobs Act.
The Affordable Care Act individual mandate repeal was not included in the original House bill..
The tax bracket system was similar to the proposed Senate system but differs greatly from the House version, which would have consolidated 7 brackets into 4.
The State and Local Taxes (SALT) deduction would have been repealed under previous versions.
The House bill family tax credit allowed for a $300 credit for each spouse and each non-child dependent. Meanwhile, the Senate version would have increased the age of qualified children under the child tax credit to children under 18.
The deduction allowance for teachers who spend their own funds on classroom equipment would have doubled under the Senate bill. Conversely, the House bill would have repealed this deduction. The final bill did not include either of these provisions.
The House bill would have repealed tax benefits for many non-traditional students, part-time students, graduate students, and lifetime learners.
Medical expense deductions would have been repealed under the House bill.
The House bill would have repealed the tax credit for energy efficient homes, the credit for electricity produced from renewable resources, and the first-time homebuyer credit.
The Alternative Minimum Tax (AMT) for individuals and the estate tax would have been repealed under the House bill.
The House version specified that a fetus—defined in this legislation as “an unborn child” at any stage in development—may be considered a beneficiary of 529 college savings plans.
For a business or school:
The House bill would have reduced the wind and energy tax credit.
Tax credits for employee health insurance expenses, pension plan startup costs, and employer-provided childcare would have been repealed under the House bill.
The House bill would have repealed the Work Opportunity Tax Credit (WOTC).
Interest earned on newly issued Private Activity Bonds (PABs) would have been taxed as income under the House plan.
The House bill would have authorized a tax subsidy for the construction of low-income housing while repealing the tax-free status of certain bonds that help builders arrange financing for these projects.
Political endorsements by 501(c)(3) organizations would have been allowed under the House bill, provided that the expenses of such regular activities were of an insignificant amount.
Have more questions?
Call our Research Hotline! Kathleen, with the help of other staff, students, and advisors, read and summarized each version of this bill—each hundreds of pages long—so that you don’t have to. Call 1-888-VoteSmart or email email@example.com and our researchers will be happy to answer your questions. A tax-deductible contribution from you makes sure that our staff and students can read these complicated bills and make them reader-friendly for all Americans!