NEW YORK: The Republican-led U.S. Congress gave final approval on Wednesday afternoon to the most sweeping overhaul of the U.S. tax code in 31 years. President Donald J. Trump is expected to sign the bill into law sometime in the next two weeks.
The bill (H.R. 1) includes a number of provisions long-sought by the chemical industry, such as slashing the corporate tax rate from the current 35% to 21% and taxing U.S.-based multinationals only on their domestic income. The House of Representatives passed it on a vote of 224-201.
“After decades enduring an outdated tax code that made U.S. businesses less competitive, our nation will soon have a modernized tax structure that promotes sustained American economic growth and new jobs,” says the American Chemistry Council, which lobbies on behalf of U.S. chemical manufacturers.
The legislation, which the Senate approved on a strict party-line vote of 51-48 early Wednesday morning, also leaves graduate students largely unscathed by preserving tax-free tuition waivers.
A provision in the original GOP House tax plan passed in early November proposed taxing as income the value of tuition waivers U.S. grad students receive when they teach courses or conduct research for their university. That set off a wave of protests at dozens of universities.
The measure was scrapped after 31 Republican lawmakers who voted for the House tax bill sent a letter to party leaders urging them to remove the provision from the final version of the legislation.
“Repeal of the income exclusion for graduate students would subject thousands of graduate students to a major tax increase at a time in their lives when they lack the ability to pay,” the lawmakers wrote.
Mary Sue Coleman, president of the American Association of Universities, says she is relieved that many of the “harmful provisions contained in the House bill” were not included in the final measure.
But she adds: “I remain troubled by certain provisions that will make higher education less accessible and less affordable. Taxing nonprofit educational institutions harms their ability to carry out the educational and research programs that serve the American public.”
The legislation also retains but cuts in half a tax credit intended to encourage biotechnology and pharmaceutical companies to develop orphan drugs to treat rare diseases that affect fewer than 200,000 people. Since 1983, companies have been allowed to write off 50% of the cost of human clinical studies to develop drugs aimed at small patient populations.
The original House bill would have killed the orphan drug tax credit entirely, while a separate Senate bill also passed in November cut the credit to 27.5% of research costs. The final bill passed by both chambers sets the tax credit to 25%.
As a result of the smaller tax credit, the National Organization for Rare Disorders (NORD) estimates that one-third fewer orphan therapies will be developed going forward.
“The cost of conducting rare disease clinical trials could rise substantially enough to discourage some biopharmaceutical companies from developing orphan therapies altogether,” says NORD, which advocates on behalf of the 30 million Americans with rare diseases.
The House had initially passed the bill on Tuesday but was forced to vote a second time after the Senate parliamentarian ruled that two provisions in the measure did not comply with budget rules and had to be stripped out. One dealt with the criteria for exemptions to a new 1.4% excise tax on investment income of private colleges and universities with endowments worth at least $500,000 per full-time student.
The deleted language would have excluded colleges with fewer than 500 tuition-paying students. The tuition paying provision was seemingly intended to help colleges with endowments large enough that students don’t pay tuition. One such college is Berea College in Berea, Ken.—Senate Majority Leader Mitch McConnell’s home state. Now the tax will apply to schools with large enough endowments and more than 500 students—Berea enrolls about 1,600—regardless of how many pay tuition.
Republicans say the tax overhaul will boost the economy by incentivizing new investments by U.S. companies and preventing jobs from being outsourced to other countries. But Democrats have lambasted the bill, arguing it primarily provides tax breaks to the wealthiest people and most profitable corporations.
