American Senate passes landmark tax bill

Donald Trump was one round of voting away from the biggest victory of his presidency on Wednesday after the Senate passed a landmark plan for the most radical tax overhaul in a generation.
The bill now needs to be approved again by the House of Representatives, which resumed debate on Wednesday after a procedural hitch required a rerun of Tuesday’s vote in favour of the measure.
It must then be signed into law by Mr Trump, an achievement that would help banish Republican memories of their failure to repeal Obamacare five months earlier.
Sarah Huckabee Sanders, Mr Trump’s press secretary, said there would be a “bill passage event” at 3pm at the White House with members of the House and Senate, but the president would sign the bill “at a later date”.
Republicans say their package of $1.5tn in tax cuts is vital to energising the US economy and they view it as crucial to their chances of keeping control of Congress in midterm elections next year.
Investors sold US Treasuries on Wednesday, however, in a sign that they expect inflation to climb.
Equities, which have rallied on the expectation of a boost to corporate earnings, were little changed in morning trading. The Senate passed the bill in the early hours of Wednesday morning by 51 votes to 48 with every Republican voting for it, except John McCain, who was absent due to ill health, and Democrats united in opposition against it.
Shortly after the vote, Mr Trump tweeted: “The United [sic] States Senate just passed the biggest in history Tax Cut and Reform Bill”, although some economists dispute that description of the legislation.
Mr Trump had pressed Republican lawmakers to agree on the tax deal, seeking to secure a clear win 11 months into a presidency marked by the Russia investigation led by Robert Mueller, and limited progress in trade wrangles and building a US-Mexico border wall.
The plan delivers a generous, permanent tax cut to corporations and more modest, temporary reductions to individuals. Republicans say it will leave more money for middle-class families but Democrats say it is a handout to the rich and powerful.
The centrepiece of the package is a big cut for corporations, which will see their headline income tax rate plunge from 35 per cent to 21 per cent, bringing the US broadly into line with the average rate in the developed world.

Paul Ryan, speaker of the House, said before the vote: “Today, we give the people of this country their money back. The bottom line here is that a typical family making the median family income will get a $2,059 tax cut next year.”
Overhauling the tax code became a fraught task for Republican leaders, who have strived to balance internal divisions, special interest pleading and a self-imposed requirement to curb the growth of the US budget deficit and government debt.

On Monday afternoon the Tax Policy Center, a think-tank, said the bill would reduce taxes for all income groups in 2018, increasing average after-tax income by 2.2 per cent.
But in 2027, the year after most of the individual tax provisions expire, it said low- and middle-income Americans would see little change in their tax bills versus current law, while taxpayers in the top 1 per cent would receive an average cut of 0.9 per cent.

 

Barney Jopson, FT