Comparing the Two Versions of the Tax Cuts and Jobs Act Headed to Conference
The House and Senate have each passed their own version of the Tax Cuts and Jobs Act, and lawmakers from each chamber will have to iron out the differences between the two bills in a conference committee. We've updated our comparison of how the two bills would change major provisions in the tax code and where their gross costs and savings come from. While the two bills are overall quite similar in both design and fiscal impact, there are several substantive differences conferees will have to reconcile.
Table 1 breaks down the major policy differences between the House- and Senate-passed bills. The most notable difference is that the Senate bill sunsets nearly all of its individual provisions and more of its business changes than the House version in order to comply with the Byrd rule's requirement that legislation passed through reconciliation not increase deficits beyond the ten-year budget window. Other noticeable differences include the House version's more aggressive base-broadening on the individual side and the Senate bill's repeal of the individual mandate and retention of the individual and corporate Alternative Minimum Tax.
Table 1: Major Differences in the House and Senate Versions of the Tax Cuts and Jobs Act
| Area | House Version | Senate Version |
|---|---|---|
| Individual Tax | ||
| Tax Rates | 12% | 25% | 35% | 39.6% | 10% | 12% | 22% | 24% |32% | 35% | 38.5% |
| Standard Deduction | $12,200 (single) / $24,400 (married) / $18,300 (head of household) | $12,000 (single) / $24,000 (married) / $18,000 (head of household) |
| Personal Exemptions | Replaced with $300 credit per person through 2022; eliminated without replacement after | Eliminated |
| Child Tax Credit and Dependent Exemptions | Dependent exemption replaced with $300 credit through 2022; CTC increased to $1,600/child – phased out at higher income than current law | Dependent exemption eliminated; CTC increased to $2,000/child – phased out at higher income than House bill; separate $500 nonrefundable credit for non-child dependents |
| Alternative Minimum Tax | Eliminated | Exemption amount increased |
| Earned Income Tax Credit | Same as current law but with program integrity measures | Same as current law |
| Mortgage Interest Deduction | Limit lowered to $500,000 of debt for new mortgages on primary residences | Mostly retained; $100,000 home equity interest deduction eliminated |
| Charitable Deduction | Mostly similar to current law | Mostly similar to current law |
| Health Exclusion | Same as current law | Same as current law |
| State & Local Tax Deduction | Eliminated for income and sales taxes; limited to $10,000 for property taxes | Eliminated for income and sales taxes; limited to $10,000 for property taxes |
| Medical Expense Deduction | Eliminated | Retained; floor lowered to 7.5% of AGI for 2017 & 2018 |
| Municipal Bond Exclusion | Private activity and advance refunding bond exclusion eliminated for new bonds | Advance refunding bond exclusion eliminated for new bonds |
| Capital Gains from Home Sales | Exclusion phased out for high earners | Residence requirement increased |
| 401(k) Retirement Accounts | Same as current law | Same as current law |
| Capital Gains and Dividends | Same as current law | Same as current law |
| Higher Education Tax Benefits | Consolidated to single benefit | Same as current law |
| Indexing of Tax Provisions | Chained CPI used for inflation adjustments | Chained CPI used for inflation adjustments |
| Other Itemized Deductions | Mostly eliminated | More retained than House bill |
| Other Tax Provisions | Several provisions repealed | Preserves more tax provisions than House bill |
| Expirations | $300 family and personal credits expire after 2022 | All individual provisions except chained CPI expire after 2025; expanded medical expense deduction expires after 2018 |
| Business Tax | ||
| Corporate Rates | Flat rate of 20%; corporate AMT repealed | Flat rate of 20% starting in 2019; corporate AMT retained |
| Pass-Through Businesses | Top rate limited to ~35% for active owners; 25% for passive owners | Creates a 23% deduction for business income capped at 50% of wage income; disallowed for active owners; expires after 2025 |
| Depreciation Schedule | Full expensing of certain equipment for 5 years; current law afterwards | Full expensing of certain equipment for 5 years, then phases out over 5 years; permanently shortens depreciation lives for buildings |
| Small Business Expensing | Increases limit to $5 million and phaseout to $20 million for five years | Increases limit to $1 million and phaseout to $2.5 million permanently |
| Domestic Production Deduction | Eliminated | Eliminated starting in 2019 |
| Interest Deduction | Limit lowered from 50% to 30% of income before interest, taxes, depreciation, and amortization for businesses with gross receipts > $25 million | Limit lowered from 50% to 30% of income before interest and taxes for businesses with gross receipts > $15 million |
| Inventory Accounting | Same as current law | Same as current law |
| R&E Expenses | Amortized starting in 2023 | Amortized starting in 2026 |
| Meals and Entertainment Expenses | Deduction eliminated for entertainment expenses; retained for meals | Deduction eliminated for entertainment expenses; retained for certain meals |
| Executive Compensation | Performance pay exception eliminated | Performance pay exception eliminated |
| International Tax | Territorial w/ base erosion provisions and one-time transition tax | Territorial w/ base erosion provisions and one-time transition tax |
| Fringe Benefit Deductions | Eliminates most deductions for fringe benefits | Eliminates most deductions for fringe benefits |
| Other Tax Provisions | Several provisions repealed | Several provisions repealed; more retained than House bill |
| Expirations | Temporary expensing and expanded small business expensing expire after 5 years | Sunsets various business provisions related to pass-throughs, expensing, base erosion, family leave, and alcoholic beverages |
| Other Taxes | ||
| Excise Tax on University Endowments | 1.4% tax on endowments exceeding $250,000 per student | 1.4% tax on endowments exceeding $500,000 per student |
| Estate Tax | Exemption increased to $11.2 million through 2024, then tax is eliminated | Exemption doubled; tax retained |
| Individual Mandate Penalty | Same as current law | Penalty reduced to $0 |
Sources: Joint Committee on Taxation, House Ways and Means Committee, Senate Finance Committee.
Despite a few noticeable policy differences, the two bills are similar in terms of their overall fiscal impact; each carry an official cost of more than $1.4 trillion over the next ten years, though the cost of the Senate version is slightly higher than that of the House bill after accounting for the gimmicks in the two bills. The Joint Committee on Taxation has not dynamically scored the House bill, but it estimated a previous version of the Senate bill would generate about $400 billion in net dynamic feedback.
Table 2 compares how much each of the provisions in each plan costs or saves. On net, the House-passed bill contains about $1.1 trillion in business tax cuts, $200 billion in individual tax cuts, and $151 billion from eventually repealing the estate tax. The Senate-passed bill, meanwhile, includes around $910 billion in net individual tax cuts, $770 billion in net business tax cuts, $83 billion in estate tax cuts; and $318 billion in savings from setting the individual mandate penalty to $0. When comparing individual provisions, it is important to keep in mind that the Senate sunsets most changes after 2025 while the House bill makes most of them permanent.
Table 2: 10-Year Costs or Savings (-) in the House and Senate Tax Cuts and Jobs Act by Provision
| Policy | House | Senate |
|---|---|---|
| Individual Tax Cuts | ||
| Reduce and/or consolidate individual income tax rates | $1.1 trillion | $1.2 trillion* |
| Roughly double the standard deduction | $921 billion | $737 billion* |
| Repeal or modify the Alternative Minimum Tax (AMT) | $696 billion | $636 billion* |
| Increase the child tax credit and/or create dependent tax credit | $641 billion* | $580 billion* |
| Other tax cuts | $0 billion | $12 billion* |
| Subtotal, Individual Tax Cuts | $3.3 trillion | $3.1 trillion |
| Individual Tax Increases | ||
| Repeal personal exemptions | -$1.6 trillion | -$1.2 trillion* |
| Reform itemized deductions | -$1.3 trillion | -$829 trillion* |
| Use chained CPI to index tax provisions | -$128 billion | -$134 billion |
| Reform higher education tax benefits | -$65 billion | N/A |
| Require Social Security number to obtain child tax credit and other changes | -$42 billion | -$24 billion* |
| Eliminate certain exclusions | -$36 billion | -$6 billion* |
| Other provisions | -$15 billion | -$8 billion* |
| Subtotal, Individual Tax Increases | -$3.1 trillion | -$2.2 trillion |
| Business Tax Cuts | ||
| Reduce corporate tax rate to 20% and repeal corporate AMT | $1.5 trillion | $1.3 trillion^ |
| Reduce taxes for pass-through businesses | $597 billion | $477 billion* |
| Move to territorial system for foreign taxation | $207 billion | $216 billion |
| Reform taxation of intangible property | N/A | $99 billion |
| Increase small business write-offs | $41 billion* | $52 billion |
| Move to full expensing of investments for five years* | $25 billion* | $108 billion* |
| Other provisions | $29 billion | $42 billion |
| Subtotal, Business Tax Cuts | $2.4 trillion | $2.3 trillion |
| Business Tax Increases | ||
| Reduce limit on interest expense deductions | -$172 billion | -$307 billion |
| Enact base erosion or other revenue-raising provisions for foreign taxation | -$209 billion | -$300 billion |
| Enact one-time tax on overseas earnings | -$293 billion | -$298 billion |
| Limit carryover of net operating losses | -$156 billion | -$158 billion |
| Limit pass-through losses to $250K/$500K | N/A | -$137 billion |
| Eliminate R&E expensing with delay | -$109 billion^ | -$62 billion^ |
| Eliminate domestic production activities deduction | -$95 billion | -$84 billion^ |
| Reform tax treatment of bonds | -$57 billion | -$17 billion |
| Modify orphan drug tax credit | -$54 billion | -$30 billion |
| Reform tax treatment of insurance companies | -$40 billion | -$27 billion |
| Limit deductions for meals, entertainment, and transportation | -$34 billion | -$40 billion |
| Limit deferral of gain on like-kind exchanges to real property | -$31 billion | -$31 billion |
| Reform tax treatment of banks and financial instruments | -$14 billion | -$17 billion |
| Reform tax treatment of executive compensation | -$13 billion | -$11 billion |
| Other changes | -$50 billion | -$37 billion |
| Subtotal, Business Tax Increases | -$1.3 trillion | -$1.6 trillion |
| Reduce and/or Repeal Estate Tax | $151 billion^ | $83 billion* |
| Eliminate Individual Mandate | N/A | -$318 billion |
| Conventional Total | $1.44 trillion | $1.45 trillion |
| Dynamic Feedback | ? | ~-$400 billion |
| Dynamic Total | ? | $1.05 Trillion |
| Extend business expensing | $175 billion | $0-$80 billion |
| Delay R&E amortization | $110 billion | $60 billion |
| Extend individual tax provisions beyond expiration | $225 billion | $290-$300 billion |
| Other gimmicks | N/A | $110 billion |
| Conventional Cost Without Expirations | $1.9 trillion | $2.0 trillion |
| Potential Dynamic Feedback | ? | ~-$450 billion |
| Dynamic Cost Without Expirations | ? | ~$1.6 trillion |
| Conventional Cost with Interest | $1.70 trillion | ~$1.75 trillion |
| Dynamic Cost with Interest | ? | ~$1.25 trillion |
| Conventional "True" Cost with Interest | $2.3 trillion | ~$2.3 trillion |
| Dynamic "True" Cost with Interest | ? | ~$1.8 trillion |
Sources: Joint Committee on Taxation and CRFB calculations. * = Provision is sunset. ^ = Provision is delayed.
This blog was corrected after publication to reflect the final Senate bill's individual rates. The original version included rates from an earlier version of the bill. The grouping of certain provisions in Table 2 was also changed modestly, though the totals remain the same.
