By Robert Schroeder, MarketWatch
The House of Representatives passed a sweeping bill to overhaul the U.S. tax code on Thursday, advancing a major policy goal of President Donald Trump and congressional Republicans.
House lawmakers voted 227 to 205 to approve the bill, known as the Tax Cuts and Jobs Act. It would cut the corporate tax rate to 20% next year from 35%; collapse the seven existing tax brackets to four; eventually repeal the estate tax; and switch the U.S. to a territorial tax system, in which companies are taxed where income is earned.
House Speaker Paul Ryan, a Wisconsin Republican, said the bill would lead to “more jobs, higher wages, better take-home pay.”
No Democrats voted for the bill. Thirteen Republicans defected, mostly from New York and New Jersey. Some members from those states oppose the bill’s elimination of the state and local income tax deduction.
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.66% rose more than 200 points early Thursday afternoon, before the vote.
While House passage of the bill is a moment of victory for Trump and the GOP, Republicans’ overhaul has several steps to go — and faces immediate hurdles. A revised bill moving through the Senate Finance Committee differs in key respects from the House measure, most notably including a repeal of Obamacare’s individual insurance mandate. The Senate legislation would also delay the corporate-rate cut until 2019, and the individual tax cuts contained in that bill would expire at the end of 2025.
Democrats have blasted the Senate measure for making individuals’ tax cuts temporary while also proposing a permanent corporate cut.
There are signs of trouble from Republicans as well. On Wednesday, Sen. Ron Johnson, a Wisconsin Republican, said he opposed the Senate measure for what he said was its unfair benefit to corporations.
The Senate’s decision to include Obamacare individual-mandate repeal may also be problematic. GOP Sens. John McCain of Arizona, Susan Collins of Maine and Lisa Murkowski of Alaska have in the past broken with fellow Republicans on broader repeal of Obamacare. Republicans hold 52 Senate seats, meaning they can’t lose more than two votes to pass legislation without Democrats.
The Republican tax bill may not add more than $1.5 trillion to the deficit over a decade under Senate rules. Repealing the individual mandate would free up $338 billion by cutting spending on Medicaid and insurance subsidies, according to the Congressional Budget Office. But it would also raise the number of uninsured Americans by 4 million next year. By 2027, 13 million more would be uninsured, the CBO found.
The House and Senate need to agree on a single measure to send to Trump for signature. The White House and Republicans are pressing to finish work on taxes by the end of the year. Trump met with House Republicans Thursday before they voted.