Now that the Senate has finally passed a tax bill, the big question is whether the House and Senate can reconcile the differences between their respective bills and get a compromise bill through both houses.
The House and Senate bills both call for cutting the corporate income tax rate for large corporations from 35 percent to 20 percent. Both would also almost double the personal income tax standard deduction for individuals and joint filers.
The House would scrap the income tax deduction for state and local taxes, while the Senate would retain a deduction of up to $10,000 for property taxes.
Now we come to the major differences between the tax bills of both houses. First, most changes in individual income taxes would expire in 2025 under the Senate plan, but would be permanent under the House plan. Second, the Senate would eliminate the individual healthcare insurance mandate under Obamacare; the House would not. And finally, the Senate would keep the personal income tax medical deduction in place; the House would eliminate it.
It will be left to a joint conference committee of Senators and Representatives to write a bill that reconciles these differences, and then gets passed by a majority vote in both houses. But their job will not be easy.
Not only will there be pressure to get the compromise bill passed before the end of the year, but the members of the joint conference committee will be subjected to almost constant pressure not only by individual members of Congress and by President Donald Trump, but also by innumerable lobbyists.
And then too, there are a couple of political wildcards looming just weeks ahead. First, a federal budget spending bill for fiscal year 2018 needs to be passed by early January. This will require the votes of eight Democratic Senators to avoid a filibuster.
And then, by mid-January, the U.S. Treasury will run up against the federal debt ceiling. An even short-term reprieve will also need the votes of eight Democratic Senators.
So it is imperative for Congressional Republicans to quickly resolve their differences and pass a compromise tax bill. Clearly, the longer that takes, the more difficult it will be.
What are the odds that a bill will be passed? Although quite a bit of blood will be left on the floor of the Capitol, sometime later this year or early next year, Congressional Republicans will probably pass a compromise bill. Few members will love it, but the president will sign the bill, and a great victory will be proclaimed.
About the Author
Steve Slavin has a PhD in economics from NYU, and taught for over thirty years at Brooklyn College, New York Institute of Technology, and New Jersey’s Union County College. He has written sixteen math and economics books including a widely used introductory economics textbook now in its eleventh edition (McGraw-Hill) and The Great American Economy (Prometheus Books) which was published in August.