On Sept. 10, House Ways and Means Chairman Brady announced the introduction of three bills that would continue the House GOP’s tax reform efforts, commonly referred to as Tax Reform 2.0. One bill, the Protecting Family and Small Business Tax Cuts Act of 2018, focuses on making permanent some of the most popular provisions in the tax reforms enacted in late 2017, including that law’s individual rate cuts and its 20 percent deduction for certain business income. In addition, it would make permanent the current limitation on state and local tax deductions, which has been controversial, particularly in states and localities where taxes are high.
The 2017 law, known as the “Tax Cuts and Jobs Act” or “TCJA” made significant changes to the tax code affecting both individuals and businesses. In order to keep the overall cost to $1.5 trillion over ten years, many of the provisions were drafted so as to expire at a specified date, or phased out of existence over a period of years. The bill, referred to as the Protecting Family and Small Business Tax Cuts Act of 2018, seeks to undo the short-lived nature of some of these provisions and make them a “permanent” feature of the tax law. Of course, even a “permanent” provision can be repealed or modified by a future Congress. “Permanent” only means that they will stay in effect absent future action by Congress. The provisions of the TCJA that would become permanent by the bill if enacted in its present form include:
- Changes to individual rate brackets
- Expanded standard deduction and repeal of personal exemptions
- Expanded child tax credit and related changes
- 20 percent deduction for certain “pass-through” business income
- Increased limitations on certain charitable contributions
- Limitation of the deduction for state and local taxes
- Limitation of the deduction for qualified home loan interest
- Changes to the deduction for personal casualty losses
- Complete disallowance of, “miscellaneous itemized deductions,” such as investment expenses
- Elimination of any overall limitation on itemized deductions (the Pease limitation)
- Increased estate and gift tax exemption
- Increased AMT exemption for individuals
For in-depth coverage of the various provisions that would become permanent, please see our prior tax alerts available at the RSM Tax Reform site.
The Protecting Family and Small Business Tax Cuts Act of 2018 would not add any new provisions. However, the other two bills in the Tax Reform 2.0 package propose additional changes, including those relating to retirement savings plans and start-up businesses. Please see our other tax alerts for coverage of the other two bills.
At this time, the prospect for enactment of any of the measures included in this bill, or other parts of Tax Reform 2.0, is quite uncertain. There may be a mark-up by the House Ways and Means Committee and a vote by the full House as early as September, but active Senate consideration of these measures is not currently expected. The mark-ups could also result in major changes to the bills as introduced.
The Tax Reform 2.0 package bill text is available below: