With U.S. Rep. John Katko's support, the House of Representatives passed a $1.5 trillion tax plan Tuesday that will largely benefit corporations and wealthy individuals — the first major legislative victory for congressional Republicans since President Donald Trump took office in January.
The House passed the bill by a 227-203 vote. The Senate approved the measure by a 51-48 vote early Wednesday.
Katko, R-Camillus, said in an interview with The Citizen that the final bill is better than the House proposal he supported in November.
"It provides tax relief for the vast majority of my constituents, especially the working poor and the middle class in particular," he said. "But it also provides everyone with more job opportunities in central New York."
The tax plan will add $1.5 trillion to the deficit, but Republicans believe the gap will be erased by increased economic growth. The legislation revamps the tax brackets and lowers income tax rates for most Americans until 2026. The standard deduction will be doubled for single filers and married couples. But the personal exemption and several credits and deductions will be eliminated. Analysts say this could minimize the benefits of the tax plan for most individuals and families.
Some credits have been preserved. The child tax credit will increase from $1,000 to $2,000 and a new credit of $500 will provide $500 for each non-child dependent in a household.
A notable deduction has been retained. The state and local tax deduction was slashed in earlier proposals, but Republicans kept it in the final bill. There will be a $10,000 cap for those who deduct state and local income, property and sales taxes.
For businesses, the bill cuts the corporate tax rate from 35 to 21 percent — a top priority for Republicans. Katko said this could spur job growth in central New York.
The legislation also includes a 20 percent deduction for owners of pass-through businesses who report the income on their individual tax returns.
Katko said he urged House Ways and Means Committee Chairman Kevin Brady to preserve three provisions in the final bill that were either eliminated or modified in the House tax proposal.
The House plan called for ending the tax-exempt status for private activity bonds, eliminating the historic preservation tax credit and calculating tuition waivers for graduate students as taxable income. Katko said local officials, including Syracuse Mayor-elect Ben Walsh, expressed concern about these provisions.
The final bill maintains the tax-exempt status for private activity bonds and tuition waivers for graduate students won't be considered taxable income, which could have increased taxes for students by thousands of dollars. The historic preservation tax credit will be preserved, but the benefits will be paid out over a five-year period instead of one year.
To ensure the provisions were in the final bill, Katko said the corporate tax rate was increased to 21 percent. Initial proposals called for it to be lowered to 20 percent.
"I think it was a fair compromise," he said.
Katko's vote — he was one of four New York Republicans who supported the bill — drew a rebuke from Democrats and activists in central New York.
Dana Balter and Anne Messenger, two Democrats who are seeking their party's nomination to challenge Katko in 2018, criticized Katko for supporting the GOP tax plan.
Balter, D-Syracuse, called the tax bill "a giveaway to corporations and to millionaires and billionaires."
"It is terrible for central New York in particular, but it's terrible for working families all over the country," she said.
Messenger, D-Manlius, added, "I don't know who he's representing, but it's not the people I'm talking with."
There are numerous provisions that concern Democrats. Outside of the purported tax benefits, the bill eliminates the Affordable Care Act's individual mandate penalty. The mandate was included in the 2010 health care law.
The Congressional Budget Office estimates that 13 million more people will be uninsured once the mandate is eliminated in 2019. The projection also suggests that health insurance premiums will rise because there will be fewer individuals in the market.
Katko said the year until the mandate is eliminated will give Congress time to develop a legislative fix for propping up the individual marketplace. He has supported repealing the individual mandate in the past and has questioned the constitutionality of the requirement.
"I don't think there's a time or a place where we should impose mandates on people where basically if they don't do something that is strictly a voluntary thing like get insurance, they're going to get penalized for it," he said. "I just don't think we should do that."
Tuesday's vote will likely not be Katko's last on the tax bill.
Due to Senate rules, a few provisions in the tax agreement needed to be removed in order for it to be considered by the chamber. Even though the changes are small, it will require another vote in the House.
The House is scheduled to vote again on the tax bill Wednesday morning.