WASHINGTON, D.C. (CNN Money) — Senate Republicans are unveiling their preferences for how to structure a tax reform bill, one week after their House colleagues.
Some of those preferences will be welcome by critics of the House bill. For instance, Senate GOP tax writers will not propose curbing the mortgage interest deduction.
But others will raise hackles. The Senate GOP plan would fully repeal the state and local tax deduction.
While their legislative bill text isn’t quite ready, the Senate Finance Committee will unveil a bill summary sometime Thursday evening.
Below are some key provisions that have been made public so far and which would affect taxes on personal income as well as business income.
Change individual income tax brackets: There are seven brackets in today’s individual tax code: 10%, 15%, 25%, 28%, 33%, 35%, 39.6%.
The Senate bill will call for seven brackets but changes them to: 10%, 12%, 22.5%, 25%, 32.5%, 35% and 38.5%. It was not immediately clear how much of one’s income would apply to each of those rates.
The House bill, by contrast, only calls for four brackets: 12%, 25%, 35% and 39.6%.
Nearly doubles the standard deduction: Like the House bill, Senate Republicans would raise today’s standard deduction for singles to $12,000 from $6,350 currently; and it raises it for married couples filing jointly to $24,000 from $12,700.
That would drastically reduce the number of people who opt to itemize their deductions, since the only reason to do so is if your individual deductions combined exceed the standard deduction amount.
Fully repeal state and local tax deduction: The Senate bill would fully repeal the state and local tax deduction, which lets filers deduct their property taxes as well as their state and local income or sales taxes.
That idea met with strong opposition from House lawmakers in high-tax states and cities. So a concession was made in the House Republicans bill, which would restore an itemized property tax deduction for property taxes up to $10,000.
If the House and Senate get to the point where they each pass their own bills and move to reconcile the differences between them, the SALT deduction could be a huge sticking point.
Expand the child tax credit: Like the House bill, Senate GOP tax writers want to expand the child tax credit. They propose raising it to $1,650, up from $1,000 today, for any child under 17. It’s also slightly higher than the House bill’s proposed increase to $1,600.
It’s not yet clear whether some or all of the credit will be refundable. Today’s $1,000 credit is fully refundable — meaning that even if your federal income tax bill is zero, you get a check from the government because of the credit.
But if the increase isn’t made refundable, it won’t be available to the lowest-income families who often don’t end up owing federal income taxes.
And like the House bill, Senate GOP tax writers would expand eligibility to take the credit by raising the income level where the credit starts to be phased out. It wasn’t immediately clear to what level.
Keep mortgage interest deduction as is: The Senate bill leaves the mortgage interest deduction untouched. You would still be able to claim a deduction for the interest you pay on mortgage debt up to $1 million, as you can today.
House tax writers have proposed capping the limit at $500,000 of mortgage loans.
In either case, because both bills would nearly double the standard deduction, the percent of filers who claim the mortgage interest deduction would fall to 4% from 21%, according to Tax Policy Center estimates.
Repeal the Alternative Minimum Tax: The AMT, originally intended to ensure the richest tax filers pay at least some tax by disallowing many tax breaks, most typically hits filers making between $200,000 and $1 million today.
Those who make more than that usually find they owe more tax under the regular income tax code, so end up having to pay that tab instead.
Tax experts often note the AMT no longer meets its original purpose and further complicates an already complex tax code. But it’s been kept on the books because it raises a lot of revenue. Repealing it would reduce revenue by $440 billion in the first decade, according to Tax Policy Center estimates.
Preserve the estate tax, but exempt almost everybody: Unlike the House GOP bill, Senate Republicans have not proposed repealing the estate tax.
But they are proposing to double the exemption levels — which are currently set at $5.49 million for individuals, and $10.98 million for married couples. Even at today’s levels, only 0.2% of all estates ever end up being subject to the estate tax.
Cut the corporate rate but maybe not right away: Like the House bill, the Senate bill would cut the corporate tax rate to 20% from 35% today. But it’s possible the 20% rate may not take effect for a year. The delay would reduce the cost of the measure in the first 10 years.
Change how U.S. multinationals are taxed: Without offering much detail, an outline of the Senate GOP plan says it would eliminate the “antiquated ‘worldwide’ system.”
Today companies in the United States owe U.S. tax on all their profits, regardless of where those profits are earned.
Many argue that puts American businesses at a disadvantage to foreign competitors. That’s because most of the competitors come from countries with territorial tax systems, meaning they don’t owe tax to their own governments on income they make offshore.
The House GOP bill would switch corporate taxation to a territorial system. That way, American companies would owe U.S. tax only on what they earn here. Their offshore profits would be subject to whatever tax is imposed by the country where the money is made.
The Senate bill is likely to call for the same.
Make expensing rules more generous: Senate Republicans want to make it possible for businesses to immediately and fully expense new equipment, although it’s not clear yet if they’re proposing to make it a permanent provision, or a temporary one as the House does.
— CNN’s Ted Barrett, Lauren Fox, and Phil Mattingly contributed to this report.