(Bloomberg) -- House Republicans passed their version of legislation to overhaul the U.S. tax code by slashing the corporate tax rate, lowering tax burdens for most individuals and adding an estimated $1.4 trillion to the federal deficit over the next decade.
The vote Thursday represents a key milestone in President Donald Trump’s quest to cut taxes for businesses and individuals -- though challenges remain for the GOP’s far-reaching tax plans to fundamentally reshape aspects of the U.S. economy. The Senate is debating its own separate plan, and it isn’t yet clear the chamber will have enough votes to pass it.
The Tax Cuts and Jobs Act H.R. 1, passed the House in a 227-205 vote. Several Republicans voted against it; many of them represent high-tax states that have the most to lose from provisions that would eliminate individual deductions for state and local income taxes.
“We are in a generation defining moment for our country,” House Speaker Paul Ryan said from the House floor before the vote. “What we’re doing here is not just determining the kind of tax code we’re going to have -- what we are doing here is determining the kind of country we’re going to have.”
“Under this plan, the average family at every income level gets a tax cut,” Ryan said.
Studies have shown that many of the tax bill’s benefits would go to the highest earners -- and some middle-class taxpayers might actually pay more.
Conservatives lauded Thursday’s vote -- a crucial step toward a much-needed win for Republicans after almost a year of unified government with no major legislative victories. The bill’s backers say its cuts would spur enough economic growth to offset the measure’s $1.4 trillion cost, as estimated by Congress’s Joint Committee on Taxation. The JCT hasn’t yet released cost estimates that would account for macroeconomic changes.
Focus now turns to the Senate, where Republican leaders will face tougher hurdles -- both political and fiscal.
Republicans control only 52 of the chamber’s 100 seats and must produce legislation that meets far stricter fiscal constraints. The Senate Finance Committee is already proposing measures that would make benefits for individuals -- including the middle class -- temporary as leaders try to avoid adding to deficits beyond a 10-year budget window.
Other significant differences between the Senate plan and the House bill include a Senate proposal to delay the corporate tax-rate cut by one year. And a Senate proposal to repeal a key provision of the Obamacare law would save the government $318 billion to help pay for the tax cuts, but leave 13 million Americans uninsured by 2027, according to official estimates.
Many of the Senate provisions are designed to cut the bill’s cost and meet budget rules that will allow GOP leaders to pass a bill with only Republican votes. Differences between the House and Senate legislation will have to be worked out between the chambers -- and then both the House and Senate will have to approve the final result.