Republicans in the Senate just passed a sweeping overhaul of the U.S. tax code, the largest change since Ronald Reagan's presidency. The bill zipped through the process in a mere three weeks (you can get a quick rundown of what's in the bill here). It's still not a totally done deal though, as substantial differences between the House and Senate bills need to be ironed out before President Trump can sign the final piece of legislation into law. But there's little doubt this is a major victory for Trump.
Here's a rundown of the winners and losers so far (you can read the entire 479 page document here):
President Trump. He promised a "big, beautiful" tax cut by Christmas. It's the centerpiece of his "MAGA-nomics" agenda, and he looks likely to get it (at least by early 2018). Both the House and the Senate have cleared major hurdles. In fact, it might even end up being a tax cut AND a repeal of the individual health care mandate, one of the least popular Affordable Care Act provisions. Most economists also expect the bill will juice economic growth, at least for the next year or two. The economy has been growing around 3 percent for the past two quarters. If it jumps to 4 percent (or more) in coming quarters, Trump can claim an even bigger victory heading into the 2018 mid-term elections and the 2020 presidential election.
Big corporations. America's largest companies are about to get the biggest tax cut ever. The House and Senate bills slash the top corporate rate from 35 percent to 20 percent. While few corporations actually pay 35 percent (the average is around 25 percent), most still get a break. Really profitable companies like Apple and Microsoft also get to bring back the piles of cash they have sitting in offshore accounts to the United States at a very low tax rate (14.5 percent in the Senate bill). There are other goodies in the bill for businesses as well, such as the ability to fully deduct the cost of new investments for the next five years. But perhaps the biggest win of all for big business is a change from a worldwide tax system where businesses have to report income earned globally to the IRS to a territorial system where they mainly pay taxes only on what was generated in the United States.
People with money in the stock market. The Dow surged above 24,000 for the first time this week. The stock market is up over 600 points (nearly 3 percent) just this week as investors cheer the tax cuts getting closer to reality. If Trump is able to sign the bill, investors are likely to get a very good deal. Many companies plan to bring cash home from abroad and give a lot of that money to investors in the form of higher dividends and stock buybacks (which increase stock prices). Overall, tax cuts mean larger profits for businesses, which means more money in the pockets of investors.
Many in the middle class (at least for awhile). Republicans have sold the tax plan as a boost to middle class paychecks. According to the non-partisan Joint Committee on Taxation, 80 percent of Americansearning $50,000 to $75,000 would get a sizable reduction in their taxes by 2019 (the average cut would be about $850, according to the Tax Policy Center). Overall, about 62 percent of Americans would pay at least $100 less in taxes in 2019. But the tax cuts for families don't last forever. The Senate bill has the lower rates for individuals going away after 2025. Republicans argue a future Congress is likely to extend the cuts, but there is no guarantee that will happen.
Sen. Mitch McConnell (R-Ken.). He did it on taxes. The Senate Majority Leader took a huge blow over the summer when the Affordable Care Act repeal failed. Trump appeared to give him the cold shoulder for awhile, but McConnell is the man of the hour now. He managed to rally GOP senators to deliver the biggest priority of all: tax cuts. It turned out to be a surprisingly difficult task with many senators demanding last-minute changes, but McConnell got 51 votes in the end.
Sen. Pat Toomey (R-Penn.). The Pennsylvania senator was one of the main authors of the Senate tax bill and he defended it vigorously on the floor of the U.S. Senate. As Democrat after Democrat slammed the bill, Toomey calmly stood up and sold the bill as a way to make American companies more competitive and profitable so they will invest more in the United States and hire more workers, hopefully raising wages as well. Toomey played an especially large role in crafting the tax changes for small and large businesses, a very complex tax.
Rich kids. The GOP tax bills make it a lot easier for wealthy parents to pass property and money to their kids. Under current law, up to $5.5 million can be passed down tax-free. After that, there's a 40 percent tax, known as the "estate tax" (or the "death tax" by critics). The House bill eliminates the estate tax entirely. The Senate bill allows rich parents to pass up to $11 million onto their heirs tax free.
Maybe Dreamers? Senator Jeff Flake (R-Ariz.) says he is voting for the tax bill despite his concerns about what it would do to the national debt because GOP leaders promised him they would pass legislation soon to allow "Dreamers" (young people in the country without documentation who have gone to school in the United States and followed the law) to stay.
Senate Democrats/Filibustering. Democrats panned the bill as a "tax scam" that gives away a ton to the wealthy and corporations, but they were not able to stop the bill. Republicans were able to pass this massive legislation with just 51 votes. Normally it would take 60 votes, but Republicans side-stepped any trouble from Democrats by using a clever tactic known as reconciliation where they are allowed to tack one major bill a year onto the budget and pass it with a simple majority vote (Vice President Mike Pence was on hand to break a tie -- we know how he was ready to vote).
Sen. Bob Corker (R-Tenn.) He made a brave last stand Thursday night to try to force Republicans to change the bill so it wouldn't add so much to the deficit. He was upset to learn that even after accounting for economic growth, the bill is still expected to cost $1 trillion. That was too much, Corker said, but in the end, his Republican colleagues had enough votes without him. Corker has already said he's retiring from the Senate after his term expires after the 2018 election. It could be lonely for him in the Senate lunch room for awhile.
People who care about the debt. For years, many Republicans have railed against America's growing debt that ballooned under President George W. Bush and then President Barack Obama because of wars, tax cuts and the Great Recession. The total debt is now $20 trillion (about $15 trillion is actually held by the public). The tax bill is likely to add at least $1 trillion more, according to the Joint Committee on Taxation, the official scorekeepers in Congress. In other words, all signs indicate the debt will continue to get worse in the coming years.
The 13 million Americans who won't have health insurance. The Senate bill isn't just a tax bill, it also includes the repeal of the individual mandate that requires all Americans to buy health insurance or else pay a penalty. This provision is not in the House bill, so it might not make it to the president's desk, but if it does, it's expected to cause a spike in health insurance premiums in the United States and 13 million Americans to drop insurance coverage in the next decade, according to the Congressional Budget Office.
The poor. The Senate bill cuts tax rates across all income levels, but 44 percent of Americans don't pay any federal income tax, so it doesn't help them. Some senators -- notably Marco Rubio (R-Fl.) and Mike Lee (R-Utah) -- pushed to give more money back to lower-income families in the form of refundable tax credits. Rubio and Lee wanted to make a lot of the Child Tax Credit refundable. But that didn't happen, meaning the poor won't get much benefit from the bill. If anything, they might lose a lot -- some won't be able to afford health insurance anymore and some are likely to lose other government benefits as Republicans look for ways to trim the federal budget in the coming months.
Puerto Rico. The island that was devastated by Hurricane Maria this fall now might lose some of the few big businesses that remain on the island if the GOP tax bill gets enacted. The reason is that Puerto Rico would no longer look so advantageous as a place to do business compared to the rest of the United States. Puerto Rico's governor is trying to push for the island to be deemed a "free trade zone," but that was not included in the legislation released before passage.
Harvard. The House and Senate bills create a new 1.4 percent tax on private college endowments worth over $500,000 per student. Only a handful of universities have such large endowments. Most are Ivy League schools like Harvard.
Maybe losers (depends on conference committee)
College students. The House bill scraps many popular deductions for college students and college grads with student loans. The House bill eliminates the popular student loan debt write off, and it forces graduate students who receive tuition waivers (sometimes as much as $20,000 or more) to count that money as income for tax purposes, even though they don't actually receive money in their pockets. It would be a big hit and many universities are saying it could heavily dissuade graduate study. The Senate bill does not make these changes.
Elderly with high medical expenses. The House bill gets rid of the deduction for huge medical expenses, which 8.8 million Americans (mostly elderly) currently use. The Senate keeps this deduction in place, setting up a major conflict to be worked out.
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