Amid sometimes chaotic scenes, the US Senate has passed a major tax reform bill which will slash the US corporate tax rate to 20%, in what is being heralded as President Donald Trump’s first big legislative victory in his push to create a ‘once in a generation’ change to the US tax code
The final draft of the bill went through multiple changes in order to convince some reluctant Republicans to give their support, with handwritten alternations added to the nearly 500-page document at the last minute. It was eventually passed by 51 votes to 49, after a series of amendments in a marathon session.
Under the Tax Cuts and Jobs Act, the corporate tax rate would be permanently lowered from 35% to 20%, while future foreign profits of US-based firms would be mainly exempt from tax.
Republicans claimed the $1.4tn (£1bn) package of cuts in the plan will in effect pay for themselves through growth. However, a Senate committee finding has warned it would add $1tn (£742bn) to the budget deficit.
The Senate will now have to merge its legislation with that passed last month by the House of Representatives, before it can be signed into law by the president.
The two bills are not identical. The Senate bill does away with federal deductions for state and local income and sales taxes, but allows deductions of up to $10,000 in local property taxes.
Like the House bill, the Senate bill nearly doubles the standard deduction level to $12,000 for individuals (up from $6,350) and $24,000 for couples (up from $12,700)
The Senate bill retains the current limit for the home mortgage interest deduction to interest paid on the first $1m of the loan, while the House bill reduces the limit to $500,000 for new home purchases.
The Senate bill keeps seven tax brackets, but reduces them to 10%,12%, 22%, 24%, 32%, 35% and 38.5%. The House measure condenses the seven brackets to four: 12%, 25%, 35% and 39.6%.
President Trump tweeted: ‘Biggest Tax Bill and Tax Cuts in history just passed in the Senate. Now these great Republicans will be going for final passage. Thank you to House and Senate Republicans for your hard work and commitment!’
