Republicans dropped a slew of changes to their tax bill on Monday - here's what they mean
- The House Ways and Means committee began their markup of the GOP's Tax Cuts and Jobs Act on Monday.
- Ways and Means chair Kevin Brady released an amendment including a slew of changes to the bill.
- The new additions would affect everything from hedge funds to colleges to low-income families.
Rep. Kevin Brady, the chair of the House Ways and Means Committee and author of the massive GOP tax bill, released an amendment on Monday with a slew of changes to the legislation that could impact everything from multi-national companies to universities.
The amendment, which passed late in the evening on a party line vote, contains seven new adjustments to the tax plan. While Democrats decried the timing and sudden changes in the bill during the Ways and Means Committee markup, the package still was able to pass due to the GOP's overwhelming advantage in the committee.Here's a rundown of the changes in the new Brady package:
- New rules to qualify for the earned income tax credit: The EITC, which gives an extra refund to employed persons with low to moderate incomes, would now include extra rules regarding reporting self-employment income, require additional information from employers to qualify, and allow the IRS more power to review applications. Republicans argued this would protect the EITC from being gamed, while Democrats said it was just more red tape to discourage poor people from getting access.
- Retains the exemption for childcare services: This would reinstitute an exclusion for up to $5,000 for employer-provided childcare for kids under 13 or dependents unable to care for themselves. This would keep the exclusion through 2022.
- Reinstituted the treatments of copyrighted songs as capital assets: This appears to be a request from Rep. Diane Black, whose district covers some of the outer suburbs of Nashville, and allows songwriters and musical artists to count their copyrighted work as capital assets. This means the sale of such works counts as capital gains, which is typically taxed lower, and not regular income.
- Changes to carried interest: The new amendment would require that for assets to qualify for the lower long-term capital gains tax they must be held for three years "with respect to certain partnership interests." This change would likely lead to some hedge funds paying more in taxes on gains since they trade assets more frequently, but may not impact private equity firms - which hold assets over a longer term typically - as much.
- Changes to a new 20% excise tax on foreign multi-nationals: A new tax would charge a multi-national 20% for shifting gains to a foreign subsidiary. For example, if a Mexican subsidiary of a car company sells a part to the US subsidiary, they would now be charged under the new rule. The amendment added changes to avoid double taxing by the foreign nation and other technical changes to make the new tax more palatable.
- Changes to the new tax on university endowments: The 1.4% excise tax would now apply to private universities with endowments worth more than $250,000 a student, up from $100,000.
The changes appear to have come directly from the concerns of various lawmakers and interest groups, and it is unclear what the revenue effects of the changes would be. According to Brady, however, even with the changes the bill would still qualify under the 10-year rules of the recently passed budget resolution.