The House Tax Cut: Who Gets What

Two-thirds of the $1.5 trillion in tax cuts proposed by House Republicans would go to business, one-third to individuals. Hedge funds would keep a key tax break. Homebuyers would lose one. But it’s just a bill. Even if the current plan passes the House, it can’t survive intact in the Senate, which has stricter rules against adding to long-term deficits. Here’s a list of winners and losers.

Corporations

Proposal: Cuts the corporate tax rate to 20 percent from 35 percent and eliminates the corporate alternative minimum tax.

Effect: The bill’s most costly tax break brings the U.S. rate in line with or lower than those of peer nations, reducing the incentive for companies to move abroad.

Federal revenue change over 10 years: –$1.5 trillion

Real estate

Proposal: Companies can continue to shelter profits from one deal by investing the proceeds in another.

Effect: Developers like the Trump Organization would benefit from the preservation of these “1031 exchanges.” They’ll also keep a tax break on carried interest.

Federal revenue change over 10 years: No change

Cash-rich companies

Proposal: Requires companies to pay a tax on foreign profit of 12 percent if held abroad as cash or 5 percent if it’s been reinvested.

Effect: Backers say companies that repatriate would invest and hire more. Critics call it a giveaway to big business that produces a one-shot revenue gain.

Federal revenue change over 10 years: +$223 billion

Multinationals

Proposal: Ends taxation of companies’ foreign profits, but slaps a 20 percent tax on payments to foreign affiliates to stop them from shifting profits abroad.

Effect: The government would lose $205 billion in taxes on dividends from foreign units but gain $266 billion from three measures to stop erosion of the tax base.

Federal revenue change over 10 years: +$61 billion

Money losers

Proposal: Limits the use of past net operating losses to reduce taxable profits.

Effect: Profitable companies sometimes acquire money-losing ones and use the target’s past losses to lower their taxes. That would be harder under this bill.

Federal revenue change over 10 years: +$156 billion

Homebuilders

Proposal: The Joint Committee on Taxation doesn’t break out revenue gains from reducing the mortgage interest deduction (see below).

Effect: It’s not just buyers who are upset about the reduction in mortgage interest deductibility. Builders are lobbying to remove the provision from the House bill.

Federal revenue change over 10 years: ???

Car dealers

Proposal: Limits the deductibility of net interest expense to 30 percent of Ebitda. For future borrowing only.

Effect: This provision is understandably unpopular with businesses such as car dealerships that borrow to buy inventory and have low margins.

Federal revenue change over 10 years: +$172 billion

Drug companies

Proposal: Eliminates the 50 percent tax credit for the cost of clinical trials of drugs for rare diseases.

Effect: Proponents say pharmaceutical companies make plenty of money from so-called orphan drugs without the added inducement of a tax credit.

Federal revenue change over 10 years: +$54 billion

Equipment makers

Proposal: Allows companies, through 2022, to deduct the full cost of equipment from taxes in the year of purchase.

Effect: The full tax break is upfront instead of spread over the useful life of the equipment, giving customers a big incentive to buy over the next five years.

Federal revenue change over 10 years: –$25 billion

Colleges

Proposal: Puts a 1.4 percent tax on the endowment income of wealthy private colleges and universities.

Effect: House Ways & Means committee tax writers say “parity requires” that well-off schools get treated the same as private foundations.

Federal revenue change over 10 years: +$3 billion