Tax Cuts and Jobs Act of 2017

Tax Cuts and Jobs Act of 2017
U.S. Government · Public domain · source
Name	Tax Cuts and Jobs Act of 2017
Caption	Legislative summary
Enacted by	115th United States Congress
Signed by	Donald Trump
Effective	December 22, 2017

Tax Cuts and Jobs Act of 2017 The Tax Cuts and Jobs Act of 2017 was major United States federal tax legislation enacted by the 115th United States Congress and signed by Donald Trump that reformed individual and corporate taxation through amendments to the Internal Revenue Code. The measure followed competing proposals from Paul Ryan, Mitch McConnell, and the Trump administration and was shaped in reconciliation by the House Ways and Means Committee, the Senate Finance Committee, and leadership in the House of Representatives and United States Senate. Congressional action occurred amid debates involving Goldman Sachs, American Enterprise Institute, Tax Foundation, Center on Budget and Policy Priorities, and other think tanks and interest groups.

Background and Legislative History

The legislative history traces to proposals from Donald Trump's 2016 campaign, coordination with Paul Ryan's blueprint, and negotiations in the House of Representatives and the United States Senate, with key drafting by the House Ways and Means Committee and edits in the Senate Budget Committee under rules set by the Congressional Budget Office. Major amendments occurred during conference bargaining influenced by lobbying from Chamber of Commerce, National Association of Manufacturers, AARP, and Business Roundtable, and were debated alongside budget resolutions led by Mitch McConnell and Kevin McCarthy. Parliamentary maneuvers used reconciliation procedures tied to the Budget Act of 1974 and votes featured party-line tallies orchestrated by leaders including Paul Ryan, Nancy Pelosi, Mitch McConnell, and Chuck Schumer.

Major Provisions

Key corporate changes included a permanent reduction of the statutory corporate rate and a shift toward territorial taxation with provisions on base erosion aligned with proposals from Tax Cuts and Jobs Act of 2017-related advisors; major individual provisions included temporary rate changes, doubling of the standard deduction, limits on state and local tax deductions, and alterations to credits such as the Child Tax Credit. The bill introduced full expensing for certain capital investments, modified rules for pass-through entities including a deduction for qualified business income, and restructured international tax provisions like deemed repatriation and the Global Intangible Low-Taxed Income regime. Other provisions affected the Alternative Minimum Tax, estate tax exemption increases, repeal of the individual mandate penalty in the Affordable Care Act, and revisions to deductions and exemptions used by a range of taxpayers including S corporations, C corporations, and multinational firms such as Apple Inc., ExxonMobil, and General Electric.

Economic and Revenue Effects

Analyses by the Congressional Budget Office, Joint Committee on Taxation, Tax Policy Center, International Monetary Fund, Federal Reserve, and private firms like Goldman Sachs and Morgan Stanley assessed impacts on growth, deficit, and investment. Proponents argued the corporate rate cut would raise capital formation and productivity citing models from Kleinbard-style corporate tax theory and supply-side economics advocates; critics referencing CBPP and Tax Policy Center estimates predicted higher deficits and distributional shifts. Empirical studies examined after-tax profits of corporations such as Walmart and AT&T, changes in share repurchases, and macroeconomic indicators like GDP growth, employment statistics from the Bureau of Labor Statistics, and wage trends analyzed by the Federal Reserve Bank of St. Louis.

Distributional Impact and Taxpayer Incidence

Distributional analyses by the Congressional Budget Office, Joint Committee on Taxation, Tax Policy Center, Urban Institute, and Institute on Taxation and Economic Policy evaluated incidence across income quintiles, households headed by different demographic groups, and regions including California, New York (state), and Texas. Results showed varying conclusions on who benefited most—corporate shareholders, high-income taxpayers, or middle-income households—prompting debates involving economists such as Paul Krugman, Greg Mankiw, Alan Auerbach, and policy advocates at Heritage Foundation and Center on Budget and Policy Priorities. State and local taxation limits prompted litigation and policy responses in states like New Jersey, New York (state), and California over local fiscal effects.

Implementation, Regulation, and Compliance

Implementation required regulatory action by the Internal Revenue Service, rulemaking from the Department of the Treasury, guidance from the Office of Management and Budget where applicable, and compliance changes for tax practitioners represented by groups like the American Institute of Certified Public Accountants. The IRS issued notices, proposed regulations, and final regulations on issues including the qualified business income deduction, international provisions such as GILTI and BEAT, and transition rules for corporate repatriation; litigation and administrative comments came from corporations including Microsoft Corporation and Alphabet Inc. and accounting firms such as Ernst & Young and Deloitte.

Political Reception and Legal Challenges

The measure generated partisan political reception with endorsements from Republican Party (United States) leaders and opposition from Democratic Party (United States) leaders; advocacy groups like Americans for Prosperity supported the law while AARP and Center on Budget and Policy Priorities criticized it. Legal challenges and state-level countermeasures targeted aspects including the cap on state and local tax deductions and the repeal of the individual mandate penalty, producing cases in federal courts and commentary from jurists including those on the Supreme Court of the United States and federal appellate courts.

Repeal, Sunset Provisions, and Subsequent Legislation

The act contained sunset provisions for many individual-tax changes scheduled under timelines overseen by the Congressional Budget Office and Joint Committee on Taxation, prompting legislative discussions in subsequent Congresses including the 116th United States Congress and 117th United States Congress. Subsequent proposals and amendments considered by legislators such as Chuck Schumer, Nancy Pelosi, and Joe Biden debated extension, repeal, or modification of provisions affecting corporations, pass-through entities, and individuals, with responses influenced by fiscal projections from the Office of Management and Budget and analytic work from the Congressional Research Service.

Category:United States federal taxation