What the Senate's tax reform bill means for health care—and how it compares with the House's bill

Senate Republicans on Thursday unveiled the chamber's version of a tax reform measure, and it included some key differences—including those related to health care—from a House bill (HR 1) slated for a vote next week.

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The House Ways and Means Committee on Thursday voted 24-16 to approve an updated version of House Republican's tax reform bill—though the updates did not change any of the bill's health care-related provisions and did not add language to the bill to repeal the Affordable Care Act's individual mandate, despite pushes from President Trump and some GOP House lawmakers to do so.

Senate bill details

Unlike the House bill, which would reduce the number of federal income tax brackets from seven to four, the Senate's tax reform bill includes seven federal income tax brackets. Tax rates for those income brackets would largely remain unchanged under the Senate bill, but the top bracket's tax rate would fall from 39.6% to 38.5%. Unlike the House bill, the Senate's bill would not repeal the estate tax. The Senate's bill would reduce the corporate tax rate from 35% to 20%, but would do so after one year, instead of immediately as proposed in the House bill.

Health care-related provisions

In another break with the House bill, the Senate's proposal would maintain U.S. residents' ability to deduct from their taxes certain health care expenses that total more than 10% of their annual adjusted gross incomes. Further, the Senate bill would create a new tax deduction for pass-through businesses, which includes physicians. In comparison, the updated House bill would implement a 9% tax rate on pass-through business entities' first $75,000 in net taxable business income. Under the amendment, that new tax rate would be phased in over five years and apply to active shareholders and owners who take in less than $150,000 in taxable income from their businesses.

The Senate bill also would implement a 12.5% tax on income U.S. companies generate from intellectual property, regardless of whether that property is housed in the United States or in another country. According to the Wall Street Journal, the provision is partially aimed at drugmakers, which sometimes register their patents abroad in order to avoid paying U.S. taxes.

Like the House bill, the Senate bill does not include language to repeal the individual mandate, though according to The Hill, many GOP senators have called for including an individual mandate repeal in their tax reform bill. Senate Majority Whip John Cornyn (R-Texas) said GOP senators still are "taking a hard look at" whether they eventually will include such a provision in their bill. Cornyn added that he expects the full Senate to consider the bill during the last week of November.

Next steps for tax reform

According to Roll Call, House lawmakers are expected to vote on their bill next week, though lawmakers still could make changes to the bill. House Ways and Means Committee Chair Kevin Brady (R-Texas) on Thursday said the House likely will not include language to repeal the ACA's individual mandate in the bill.

Senate Majority Whip John Cornyn (R-Texas) said he expects the full Senate to consider the bill during the last week of November. In regards to the individual mandate repeal, Cornyn said GOP senators still are "taking a hard look at" whether they eventually will include a provision to repeal the individual mandate in their bill (McCrimmon, Roll Call, 11/9; McPherson [1], Roll Call, 11/9; McPherson [2], Roll Call, 11/9; Rappeport, New York Times, 11/9; Baker, "Vitals," Axios, 11/10; Rubin, Wall Street Journal, 11/9; Sullivan, The Hill, 11/9; Cornwell, Reuters, 11/9).

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