A degree of drama accompanied Congress as members finally passed the GOP tax reform bill earlier today. Yesterday afternoon, the House passed the Tax Cuts and Jobs Act (H.R. 1) by a vote of 227 to 203, with 12 Republicans joining all Democrats in voting against the bill.
The Senate then began to debate, but quickly realized that two minor provisions in the House language would not survive Senate rules. After removing the provisions, the Senate moved to pass the bill along a party line vote of 51 to 48. Earlier this afternoon, the House took up and passed the bill one final time by a vote of 224-201.
From the beginning of the tax debate, the IAFF was on the frontlines, fighting parts of the legislation that threatened fire fighters’ hard-earned benefits.
Each new version of the bill included a harmful policy that the IAFF would have to address and remove. Initial bill language wanted to apply a 10 percent penalty on early withdrawals from deferred compensation plans; a benefit created through the advocacy of the IAFF. An attempt was made to severely reduce the “catch-up” retirement benefit for public employees. Workers and their ability to maximize savings in the last few years of their career would have been drastically impacted.
In a final attack on retirement benefits, Republicans tried to tax, for the first time, specific types of unrelated business income earned by pension plan investments. The tax would have unfairly targeted plans for making sound, long-term investments while cutting into return rates. The IAFF identified and defeated these attempts by highlighting the importance of a strong and secure retirement for fire fighters.
Unfortunately, one provision the IAFF opposed remains in the final bill – a partial elimination of the State and Local Tax deduction (SALT). Initial versions of the bill either eliminated the SALT deduction completely or capped the deduction at $10,000 for property taxes only.
By joining with allies in state and local governments and conducting targeted grassroots outreach to convince Republican lawmakers from high-tax states to oppose the provision, the provision was eventually watered down. The final compromise provision will allow a tax filer to deduct up to $10,000 of any combination of their sales or income and property taxes from what they owe the federal government.
The IAFF and other stakeholders fought against the full repeal of the SALT deduction from the beginning of the bill-writing process, knowing how strongly leadership wanted it included as the foundation to the bill. By moving Congress to accept the combined $10,000 cap, tax payers will save thousands of dollars per year as compared to the original proposals.
Referring to the final package, General President Schaitberger says, “This was a large bill with a lot of moving parts, destined to move forward by Republican leadership. At the end of the day, we were able to protect our members from the more dangerous provisions originally included in this bill.”
This legislation will be the most comprehensive change to our tax system since the 1980s. For individuals, lower taxes will come from changing the seven tax brackets and applying higher income thresholds. The standard deduction for individuals and families will also be increased while eliminating many of the personal exemptions and deductions a filer can typically take.
Business taxes have also been reformed under this bill. Corporations will now be taxed at 21 percent – down from 35 percent – and smaller businesses, known as “pass throughs,” will be taxed at 21 percent, with an extra 20 percent deduction. Additional changes were made to how businesses that conduct business outside the United States are taxed.
The legislation will now be sent to the president’s desk.