The Senate passed sweeping revisions to the U.S. tax code on Saturday after Republicans secured enough votes to pass the measure. The revision bill included $1.4 trillion in tax cuts, lowering the corporate rate to 20% from 35%, restructures international business tax rules and temporarily lowers individual taxes.
The bill passed 51-49, with all but one Republican voting for it and all Democrats voting against. The only Republican to vote against the bill, Senator Bob Corker of Tennessee, expressed his opposition before the vote, stating worries it would expand budget deficits.
The bill’s ultimate passage would mean a great deal to republicans, marking a legislative victory for President Donald Trump and the GOP. President Trump has made a tax overhaul one of his main economic policy goals, focusing on rewriting business taxes in an attempt to make the U.S. more competitive internationally. The bill could also give republicans a boost in the upcoming 2018 midterm elections, which could ultimately influence the presidential campaign in 2020.
The House and Senate still need to reconcile competing versions of the tax plan, something GOP leaders hope to do by Christmas. The bills overlap in many ways, and lawmakers expressed optimism about getting a final deal done by the new year.
Senate Republicans called the bill an “economic booster shot”, arguing the bill would promote faster sustained growth and higher wages. However, Congress’s own nonpartisan economic analysis found that the economic benefits would be modest and would fade over time.
The Joint Committee on Taxation estimated that the tax cuts wouldn’t pay for themselves, as Republicans originally promised. The analysis estimated the tax cuts would increase deficits by $1 trillion over a decade, even after factoring in economic growth.
Investors, for now, are more excited about the prospect of lower corporate taxes than about the risks associated with larger government deficits. The Dow Jones Industrial Average rose 673.60 points for the week, or 2.9%, to 24231.59. Yields on 10-year Treasury notes, which might be expected to rise if bond investors were worried about deficits, remain around 2.5%.
“This bill, when ultimately passed will provide much needed tax relief for lower and middle-class families, while spurring the creation of favorable jobs and stronger economic growth in the U.S.” said Keith Knutsson of Integrale Advisors.
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