House and Senate Republicans reached a deal this week on the final version of the Tax Cuts and Jobs Act, and hope to deliver a bill to President Trump. The final version has multiple provisions, including a raise in the corporate rate from 20 percent to 21 percent, a $10,000 state and local income deduction cap, a $10,000 real property tax deduction cap and a $750,000 mortgage interest deduction cap.
The state and local income tax deduction was partially reinstated to meet the demands of Republicans from high-tax states, primarily New York, New Jersey, and California. To further offset losses for high-earners in these states, the final version of the plan will lower the top income tax rate from 39.6 percent to 37 percent.
The final bill’s prospects were immediately complicated by Sen. Marco Rubio (R-FL) who announced he will vote no on the final Republican plan unless it expands the child tax credit. Republicans can only afford to lose two votes on the Senate Floor, where Bob Corker (R-TN) voted no on a previous draft. Corker’s concerns about the bill’s impact on the deficit were not addressed in the final text, and there is no reason to believe he will vote yes this time around. Republicans can only afford to lose two-votes on the tax reform plan, and Vice President Mike Pence has been forced to postpone his trip to Israel so that he can provide a tie-breaking vote if necessary. Last-minute negotiations will continue through the weekend to bring on as many Republican hold outs as possible before the bill is brought to the floor for a vote sometime next week.