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Congress to Make Tax Cuts Loss of Deductions Permanent

Pete Scott - Sep 14 2018
Published in: Public Policy

U.S. House Republicans announced new legislation on 10 September 2018, that would make individual tax cuts enacted late in 2017 permanent, and also make permanent the loss/limitations of a number of individual tax breaks.  

Those include the elimination of the deduction/exclusion for moving expenses and the limitation of deductions for state and local taxes to $10,000.  

When the Tax Cuts and Jobs Act (TCJA) was enacted in December of 2017, changes to tax rates and other provisions affecting individuals were made temporary, rather than permanent. The reduced tax rates were to be in effect only through 2025, and then revert to the old rates. Likewise, certain tax breaks that were targeted for removal or limitation were only affected through 2025. For example, the deduction/exclusion for moving expenses was characterized as “suspended” for the years 2018 through 2025, after which it would revive.

The temporary nature of the tax cuts was made necessary by the budget process which permitted tax reform to be enacted by only a 51-49 majority in the Senate, rather than the 60 votes ordinarily necessary to pass legislation in that body, and by restrictions on the cost of the legislation.

Since then, a Republican goal has been to make those tax cuts permanent. That effort has been characterized as “tax reform 2.0.”

The bills introduced 10 September would do just that. They would also make permanent the increase to the standard deduction. In addition, they would make the repeal of or changes to a number of tax breaks permanent. These include:

  • Repeal of the moving expense deduction and exclusion (except for the military)
  • Limitation of state and local tax deduction to $10,000
  • Repeal of deduction for personal exemptions
  • Limitation of deduction for mortgage interest to interest of debt of $750,000
  • Repeal of deduction for miscellaneous itemized deductions
  • Limitation of casualty loss deduction

House Ways & Means Committee chair Brady said the Committee would mark up the bills on 13 September, with a vote of the full House later in the month. Brady expressed confidence that the legislation would pass.

The Joint Committee on Taxation predicted that the bills introduced would cost $627 billion over ten years, and Democrats promised opposition. Although the legislation is likely to pass the House, its fate in the Senate is less clear.

How This Impacts Mobility  

Both the reduced tax rates and the loss of deductions have significant effects on the taxation of mobility. Gross up calculations are affected, as well as company costs due to the loss of the moving expense exclusion. Assuming this legislation passes, companies can plan for the future knowing that the tax rates and other provisions that affect mobility will not change.