U.S. President Donald Trump is on the verge of achieving his biggest legislative win after the US Senate approved the biggest overhaul of the country’s tax system in over three decades.
The Republicans have said that the tax cuts provided for small businesses, corporations, and individuals will boost job and economic growth. The Democrats who voted against it have called it a tax bill that is aimed at benefitting only the ultra-rich .
The bill will head back to the House for a final approval where it is expected to pass. When it does, it will mark the first major triumph for President Trump.
The Bill Provisions
The most significant changes introduced by the bill:
- Corporate taxes are slashed to 21%, from the current rate of 35%.
- An expanded child tax credit for individuals
- Reduced taxes on overseas profits for businesses
- Less inheritance tax
- It will also lower individual tax rates, but only until 2025
Strenuous Opposition To Bill
The vote that passed the bill was split on party lines – Republicans in favour, Democrats in protest.
Republicans have majorities in both the houses – the House approved the bill 227 to 203 while in the Senate, it was 51 to 48
Democrat leader Chuck Schumer has warned that the Republicans will pay a price for the “awful legislation” in mid-term elections slated for next year.
Speaker Paul Ryan however celebrated the vote, saying “we are giving the people of this country their money back. This is their money after all!”
Businesses Benefit The Most
The tax reform brings good news for businesses, especially the multinational corporations and also to the commercial property industry.
Parents sending their children to private schools are likely benefit with the increased tax credit amounts. However families who live in high-cost, high tax states could lose out. Also those who pay for their own health insurance will also be losers.
A majority of tax paying individuals are likely to benefit from tax cuts but this will last only until in 2025.
According to Tax Policy Center estimates, the overall change for individuals as a result of this bill is likely to be negligible by 2027. It also estimates that 53% of taxpayers may face higher tax bills particularly those belonging to the lower income brackets.
The bill also approves a controversial proposal to open drilling in parts of the Arctic which have remained under protection for environmental reasons since 1960.
Bill Runs Into Minor Procedural Hiccups
In the final phase of the bill’s passage, it was found that three procedural rules had been violated. Since small changes in the bill’s wording were made, it will now return to the House of Representatives for its approval.
House Democratic leader Nancy Pelosi cited the re-vote as “latest evidence of just how shoddily written the GOP tax scam”, even as others have criticised the speed of the bill’s passage.
But Republicans have defended the lapse saying that any major overhaul effort is likely to have hiccups.
Impact of The Landmark Tax Bill
This is likely to be seen as President Trump’s signature legislative achievement. The President will have finally scored a major win flexing his party’s majority presence in the legislative houses and overcoming internal dissent to accomplish one of the party’s cherished goals.
Assuming the bill passes, Republicans will have slashed taxes by over $1.4 trillion over 10 years, also incorporating significant permanent changes to the corporate tax structure.
The bill opens up the Arctic National Wildlife Refuge to oil drilling and has eliminated one of Obamacare’s most important features – tax penalty for those not having medical insurance.
The tax bill has been passed just like Obamacare was passed on partisan strength alone, leading to many in the country believing that it will be of benefit to others
The Republicans now have the task of convincing the public of its benefits ahead of critical elections next year. Most leaders have argued that Americans will be convinced when they see lower tax bills.
Impact on rest of the world
The stock market in the US has jumped in the past weeks anticipating the tax cuts. Any growth witnessed by the US economy is likely to have knock-on effect around the world.
The tax cuts could influence US companies having offshore businesses to keep their money at home, and also due to the new restrictions on shifting profits abroad. Companies having overseas operations are set to be taxed at just 15.5% when they return the cash to the US under a one-time move.
