4 MIN READ
How Much Money Would You Take Home Under the Senate Tax Reform Bill?
While most of us were kicking back and decompressing from the workweek, our senators were up until the early morning hours on Saturday casting their final votes on a tax plan that will impact nearly everyone in the country.
The Republican plan has been widely criticized by Democratic senators, who were given a revised bill that contained crossed-out pages and handwritten, sometimes illegible, notes hours before they would vote.
“We’re doing massive tax reform on an absolutely incredible timeline,” said Sen. Jon Tester, a Montana Democrat, of the 479-page bill. “This is going to affect everybody in this country. It’s going to shift money from middle-class families to the rich.”
Every Democrat and one Republican, Sen. Bob Corker of Tennessee, voted against it, but in the Republican-led Senate, that was still enough to pass the bill with a 51-49 split.
Senate Majority Leader Mitch McConnell celebrated the win on Twitter, saying it would boost the economy, help grow small businesses and give America more energy independance.
Now there are just two big questions: What was in it? And what does that mean for you?
Senate Plan Lowers Your Taxes Even More, Technically
Compared with the tax plan passed by the U.S. House of Representatives last month, the Senate plan looks like it’ll boost your paycheck even more.
Business Insider crunched the numbers to show what a family of four with parents filing jointly and two children under 17 would expect to pay in taxes under both plans. Here’s what it found:
- A family that brought in $25,000 each year would pay $72 more in taxes than it currently pays and see a smaller refund check under the House plan. Under the Senate plan, that same family would see tax savings of $100 compared with the current tax code and see a larger refund check.
- A family that makes $75,000 annually would owe $3,983 to the government under our current tax code. Under the House plan, that family would see tax savings of $1,711. The more generous Senate plan would mean that family’s tax bill is cut even further, for savings of $2,244.
- Finally, a family that brings in $175,000 — earning more than 97% of the country’s taxpayers — would pay $24,414 in taxes under our current tax code. Under the House plan, that family would save $2,264, while the Senate plan would mean $3,095 in savings.
On the surface, the Senate tax plan appears to have the biggest payout for everyone. But the tax cuts come with a major caveat: They expire for individuals in 2025.
That means if the Senate plan becomes law, many families would get a break now, but taxes would revert to their current form in 2026 unless Congress passes new tax laws before then.
Major Changes Still to Come Before Tax Reform Becomes Law
Now that the House and Senate versions of the tax plan have passed, President Donald Trump expects to have a bill on his desk to sign into law by Christmas.
But the two reform plans are vastly different on some important issues that will affect many Americans. Here are some of the big ones, according to CNBC:
- The House thinks tuition waivers granted to graduate students should count as taxable income, while the Senate does not.
- While the House plan says mortgage interest deductions will only apply to properties worth less than $500,000, the Senate plan keeps the cap at $1 million.
- The House plan will still impose a penalty on those who don’t sign up for health care. The Senate plan will remove that mandate, which was a part of the Affordable Care Act, often referred to as “Obamacare.”
- The House plan says corporate taxes will permanently be cut from 35% to 20%, which critics say will mostly benefit large corporations and the super-rich. Tax bill supporters say this move will help companies create jobs. The House wants the cut to happen immediately. The Senate wants the same cut but says corporations must wait until 2019.
Of course, Trump can only sign one tax reform bill into law. That means the House and Senate will have to come together to close the gap and present the best version of the bill.
Desiree Stennett (@desi_stennett) is a staff writer at The Penny Hoarder.
The Penny Hoarder Promise: We provide accurate, reliable information. Here’s why you can trust us and how we make money.