#1. Corporate, Business and Individual Tax Rates Would be Significantly Reduced
The proposed House and Senate bills would both significantly slash corporate, business and individual tax rates. The House and Senate bills would slash the corporate rate down to 20 percent (although the Senate version would delay the rate reduction until after 2018) and reduce the rate on small and family-owned businesses to no more than 25 percent.
On the individual side, the House bill would collapse the current seven tax brackets into brackets of zero, 12 percent, 25 percent and 35 percent. The Senate version would however maintain the seven tax brackets, with a modified top bracket of 38.5 percent.
#2. Several Credits, Incentives and Deductions Would be Removed to Offset Rate Reductions
To pay for the proposed rate reductions, the House and Senate bills would remove a number of business credits and incentives (including certain mortgage deductions, DPAD and WOTC). Additionally, the Senate version calls for the full repeal of state and local deductions (putting them at odds with House Republicans in high tax states).
#3. The R&D Tax Credit Stays and Could be Expanded for Domestic Manufacturers
While many credit and incentives will be facing the chopping block, the Research and Development Tax Credit would remain—and factoring in separate legislation introduced by Senators Chris Coons (D-DE) and Pat Roberts (R-KS)—could potentially be strengthened for domestic manufacturers.
#4. The Bill Would Move Away From a World Wide Tax System
With respect to international tax, the bill would move away from a “worldwide” tax system and eliminate incentives that reward companies for shifting jobs, profits and manufacturing facilities overseas.
#5. Key Differences Remain Between the House, Senate and the Administration
With the GOP’s legislative agenda having stalled over the past year, the party is facing tremendous pressure to get something passed before next year’s midterm elections. However, with key differences rising between the House, Senate and the Administration (including the above differences related to the timeframe for the corporate rate reduction and the removal of state and local tax deductions) there is still a long way to go until a tax bill reaches the president’s desk.