Republicans have sped legislation through the House to expand their massive new tax law, capping their session for the year as they rush out of town to face voters in the November elections. The new bill would make permanent the individual and small-business tax cuts in the law. Friday's vote was 22-191 in the Republican-led House to approve the legislation. The vote was mostly along party lines. Democrats continued their solid opposition to tax-cut legislation, asserting it favors corporations and wealthy individuals over middle-income Americans. It's the second tax-cut proposal that Republican leaders have pushed in less than a year. “On top of making lower rates for individuals and small businesses permanent, these bills create new savings options for families to plan for education and retirement," House Speaker Paul Ryan said in a statement obtained by FOX Business. Prospects for the legislation in the Senate are weak, given the slim Republican majority and concern over the potential for further blowing up the deficit. President Trump's historic tax reform plan, enacted late last year, has been credited with reviving the U.S. economy. Second-quarter GDP grew 4.2%, the strongest showing since 2014. Jobs are plentiful with U.S. unemployment falling to 3.9 percent. Additionally, U.S. stocks are sitting at record levels. The Associated Press contributed to this report.<doc-sep>A three-bill legislative package known as Tax Reform 2.0 cleared the GOP-dominated House during votes on Thursday and Friday. While the legislation is expected to be dead on arrival in the Senate, some proposed changes to retirement savings could remain in play. Among other changes, the bills would make recently enacted tax cuts for individuals permanent, expand retirement and education accounts and create tax-advantaged Universal Savings Accounts. While supporters say a second round of tax cuts would lead to continued economic growth, critics point to its $627 billion price tag over the next 10 years, based on an analysis by the Joint Committee on Taxation. That's on top of the $1.5 trillion the already-passed cuts are projected to cost during the same period. Ways and Means chairman Rep. Kevin Brady, R-Texas, conducts a news conference on issues including the GOP's tax reform bill, in the House studio after a meeting of the GOP Conference on April 17, 2018. Tom Williams | CQ Roll Call | Getty Images "The Senate is not expected to debate these bills," said Nicole Kaeding, director of federal projects for the Tax Foundation, a nonpartisan tax-policy research group. She said, however, that several of the legislation's retirement-related provisions are similar to an existing bipartisan bill in the Senate that could be considered later this year. That bill, the Retirement Enhancement Security Act (S. 2526) would remove the 70½ age limit for making contributions to traditional individual retirement accounts and would make it easier for small businesses to band together to offer 401(k) plans, among other provisions. It also would make it easier for 401(k) plans to offer annuities by creating a regulatory "safe harbor" and, as long as plan administrators meet certain requirements when choosing an annuity provider, they'd get some legal protection. Although that provision initially was excluded from the Tax Reform 2.0 package, it was added via an amendment that was tacked on to one of the House bills late Wednesday. "Some parts of [Tax Reform 2.0] might have some issues, but we're optimistic that the retirement piece might get some traction in the Senate," said Paul Richman, vice president of government affairs for the Insured Retirement Institute, which advocated for the amendment. House GOP leaders were committed to pushing the tax bills through this month before members head to their districts to campaign ahead of the November midterm elections. Even if most of the provisions in the House bills end up shelved, they could be revived next year when a new Congress is in place or at another time, depending on the balance of power. Here are some highlights of the bills that passed this week. Making tax cuts permanent The first bill is called the Protecting Family and Small Business Tax Cuts Act of 2018 (H.R. 6760). In addition to making permanent the cuts to individual tax rates that took effect this year, it would lock in other changes that are set to expire at the end of 2025. Reduced tax rates through 2025 Rate Single Head of household Married filing jointly 10% Up to $9,525 Up to $13,600 Up to $19,050 12% $9,526 to $38,700 $13,601 to $51,800 $19,051 to $77,400 22% 38,701 to $82,500 $51,801 to $82,500 $77,401 to $165,000 24% $82,501 to $157,500 $82,501 to $157,500 $165,001 to $315,000 32% $157,501 to $200,000 $157,501 to $200,000 $315,001 to $400,000 35% $200,001 to $500,000 $200,001 to $500,000 $400,001 to $600,000 37% Over $500,000 Over $500,000 Over $600,000 That means the doubled standard deduction and elimination of personal exemptions would become permanent, along with the increased child tax credit, the elimination of most deductions and the $10,000 deduction cap on state and local taxes. The higher federal estate tax exemption of $11.2 million per individual also would be extended. Separately, the bill would continue the higher deduction for medical expenses. Under rules implemented in last year's tax legislation, qualifying medical expenses in excess of 7.5 percent of your adjusted gross income can be deductible if you itemize. Instead of letting that floor rise to 10 percent in 2019 as scheduled, H.R. 6760 would extend the lower threshold through 2020. The measure also would make the 20 percent deduction for so-called pass-through businesses permanent. A focus on savings The second bill, the Family Savings Act of 2018 (H.R. 6757), includes changes to retirement and education accounts and creates a new tax-deferred savings account. For starters, the measure would remove the age limit on individual retirement account contributions. Currently, IRA owners cannot make additional contributions beginning in the year they turn 70½. Roth IRAs, by contrast, do not have a contribution age limit. It also would exempt people with less than $50,000 in their retirement accounts from taking required minimum distributions, which start when you turn 70½. It also would allow families to withdraw up to $7,500, penalty-free, from retirement accounts for costs related to a new child, whether by birth or adoption. More from Personal Finance: Two tax-friendly ways to donate money Why investing in the next big start-up could be a disaster for your finances Public pensions are paying higher fees for lower returns, Pew study finds Additionally, 529 education accounts could be used to cover the cost of home schooling, for fees related to a trade apprenticeship and to help pay off a student debt. The bill also endorses Universal Savings Accounts, which would allow savers to set aside tax-advantaged money for basically anything. The accounts, which would come without restrictions on when (or why) the owners can make use of them, would work similarly to Roth IRAs. Up to $2,500 of after-tax income yearly could be contributed to an account, while the withdrawals — including any investment gain or interest — would be tax-free. Another provision would allow smaller firms to more easily band together to offer their employees a 401(k) plan. As it stands, so-called multiple employer plans restrict exactly which businesses can team up. For start-up businesses<doc-sep>The House passed the GOP's "Tax Cuts 2.0" package on Friday. The centerpiece of the three-bill package was a measure to extend the individual tax cuts form last year's Tax Cuts and Jobs Act. Those individual cuts are currently set to expire after 2025, but the new bill would make them permanent. According to tax experts, the extension would offer a small boost to economic growth in the short-term, give most of the gains to wealthier Americans, and substantially increase the federal deficit. Due to Senate rules, the House bill is likely dead on arrival in the upper chamber. House Republicans passed a major tax reform package on Friday, known as the "Tax Cuts 2.0" package, in an attempt to follow up on last year's massive tax-cut effort. While the package will now head to the Senate, it's likely that the second tax cut is dead on arrival in the chamber. What's in the package? The Tax Cuts 2.0 package is three separate bills: The American Innovation Act, the Family Savings Act, and the Protecting Family and Small Business Tax Cuts Act of 2018. The centerpiece is the third bill, which would extend the individual tax cuts from last year's Tax Cuts and Jobs Act, or TCJA. Republicans were forced to choose last year whether to make permanent corporate tax cut or individual tax cuts, due to Senate rules around the federal deficit. To have the bill qualify under the rules, the GOP chose to let the individual cuts to expire after 2025 while making corporate cuts permanent. The Protecting Family and Small Business Tax Cuts Act would extend the individual cuts into 2026 and beyond. The bill passed the House by a 220-191 vote, with three Democrats voting for the bill and 10 Republicans voting against it. The other two other elements of the package, which would change the tax treatment for certain retirement accounts and allow businesses to deduct start-up costs, passed by wider margins of 240 to 177 and 260 to 156 respectively. What would be the effects of Tax Cuts 2.0? Similar to the TCJA, most independent analyses show the bill would provide a modest boost to the US economy in the short-term, while the benefits would be tilted toward wealthier Americans. According to the Tax Policy Center (TPC), a nonpartisan think tank, the individual tax cut extension would cut taxes for American households by $1,600 on average in 2026. But the gains would not be shared equally among different income cohorts. "The bill to extend the TCJA’s individual and estate tax cuts has the same structural flaws as the original. It is an enormous budget-buster that primarily benefits high-income households," Howard Gleckman, a senior fellow at TPC, wrote. For example, households in the lowest income quintile (households making up to $28,600) would receive an average tax cut of $100, or a 0.5% boost to after-tax income. Those in the middle-income quintile (incomes of 54,800 to $95,000) would get an average cut of $980, a 1.3% average boost to incomes. People in the top 1% of income earners (making $836,200 and up) would get an average cut of $40,180, a 2% boost to after-tax income. Additionally, while most people — around 66% of households — would receive a tax cut, roughly 9% of households would actually see their tax bills increase due to the elimination of some tax credits. The other 25% would see a change in their tax bill of $100 or less. The TPC and the conservative-leaning Tax Foundation also estimated that the bill would boost economic growth, but they differ on how much. The TPC estimated a 0.5% GDP boost in 2026, 0.4% in 2028, and 0.1% in 2038. On the other hand, the Tax Foundation estimated the extension would boost GDP by 2.2% over the long-run. The package would also add to the federal deficit. According to the Joint Committee on Taxation, the extension of the individual tax cuts alone would add $545 billion to the federal deficit between 2019 and 2028 when factoring in the economic boost from the law. TPC estimated that the entire package would add $631 billion to the deficit through 2028 and another $3.8 trillion from 2029 to 2038. The Tax Foundation estimated that the move would decrease federal revenues by $576 billion through 2028 and $113 billion every year afterwards even when factoring in the economic growth benefits. Is this going to become law? Probably not. The TCJA was able to make it through the Senate despite the GOP's narrow majority because Republicans used a procedure known as budget reconciliation. This meant that the bill only needed a majority vote in the Senate and was not subject to a filibuster. By contrast, Tax Cuts 2.0 is being advanced outside of the budget reconciliation process and would need 60 votes to avoid a filibuster. Given the GOP's 51-49 seat margin in the Senate, this would require nine Democrats to support the bill. Even if Republicans could pick up a few votes from across the aisle, it is not clear that every GOP senator would even support the package. Many Republican members, such as Sen. Bob Corker, were barely able to stomach the TCJA's contribution to the federal deficit and the prospect of adding another heap of debt could be a nonstarter. Jon Traub, managing principal at Deloitte's Tax Policy Group, wrote after the House passage that there is unlikely to be more movement. "This may be the last action we see taken on this issue in 2018, as its unlikely those changes would get to the White House this year," Traub wrote.<doc-sep>The new package would also make permanent the Republican tax law’s new $10,000 cap on how much taxpayers can deduct from their state and local taxes. That policy, intended to offset the enormous price tag of the original law, has been criticized by Republicans and Democrats in states like New York, New Jersey and California, where taxpayers are more likely to be affected by the cap because their states have high taxes.<doc-sep>
WASHINGTON—House Republicans passed a $631 billion extension of the tax cuts they enacted in 2017, reprising their biggest legislative success of the past two years as they try to avoid losing their majority in the Nov. 6 election. The legislation, which passed on a 220-191 vote, was part of a three-bill package that Republicans dubbed “Tax Reform 2.0.” On Thursday, they passed bills to expand retirement-savings incentives and tax breaks for startup businesses, picking up some Democratic support for those narrower measures. For now, the Senate has no plans to vote on any of the House bills, making this week’s votes more of a campaign plank and marker for future negotiations than the beginning of a legislative effort. House members aren’t expected to return to Washington until after the election. Three Democrats voted for the bill, including two of the party’s Senate candidates: Rep. Kyrsten Sinema of Arizona and Rep. Jacky Rosen of Nevada. Ten Republicans voted no, all members from California, New York and New Jersey who opposed the cap on the deduction for state and local taxes. Ms. Rosen and Ms. Sinema were the only lawmakers who voted against last year’s tax law and for today’s bill. Rep. Darrell Issa (R., Calif.) was the only one who moved the opposite way. Friday’s bill was the largest and most controversial in this week’s GOP package. It would remove the 2025 expiration date from the key individual tax cuts. Those include lower tax rates, the larger standard deduction and child tax credit, the doubled estate-tax exemption, a 20% deduction for income of partnerships and other similar businesses and limits on the deduction for state and local taxes. Republicans set the expiration date in last year’s law while making corporate tax-rate cuts permanent. They used a procedure that let them get last year’s law through the Senate without Democratic votes but prevented them from increasing long-run budget deficits. “I wanted to make the tax cuts for individuals and small businesses permanent in the first place,” said Rep. Tom MacArthur (R., N.J.). “The reality is the economy is booming because we are leaving more money in businesses and families and people don’t put money under their mattress. They put it to work.” With the country focused on the Supreme Court nomination, health care and President Trump, the tax law isn’t the biggest election issue. But Republicans say they are talking about it on the campaign trail and pointing to the markers of economic success—declining unemployment, rising gross domestic product and more money in families’ pockets. “This is good policy and this good policy is going to lead to good politics,” said Rep. Tom Reed (R., N.Y.) Republicans set up Friday’s vote as a contrast with Democrats, aiming to paint them as willing to let taxes increase on households. Democrats are eager to fight on tax policy and are just as eager to talk about the law during their campaigns. They say too much of the benefit goes to high-income households and corporations and warn that Republicans will use increasing budget deficits to justify cuts to Social Security and Medicare. “Most American people have understood that their lives have not gotten better from the last tax cut,” said Rep. Pramila Jayapal (D., Wash.) “I don’t see anybody running on the tax cut. They’re running on Nancy Pelosi, which isn’t very compelling because she’s more popular than Donald Trump is.” The $631 billion price tag understates the fiscal effect of Friday’s bill because the tax cuts would extend beyond 2028, the measurement period used by Congress. In the long run, the bill would shrink the economy because it would expand budget deficits, according to Congress’s nonpartisan Joint Committee on Taxation. Under the bill, 66% of households would get tax cuts in 2026, compared with what would happen if the expirations occurred, according to the Tax Policy Center, a research group run by a former Obama administration official. About 9% of households would pay more in taxes. Households at all income levels would benefit, according to the Tax Policy Center, but the largest gains would go to those between the 95th and 99th percentile of income, who would get a 3.3% boost in after-tax income, about double the national average. Write to Richard Rubin at richard.rubin@wsj.com