House and Senate Republicans have moved forward with Tax Reform bills that, if enacted, would be the first comprehensive reform of the Internal Revenue Code in over thirty years.

The House of Representatives passed its version of the bill by a vote of 227 to 205. In the Senate, a similar, though different tax reform bill, passed the Senate Finance Committee with a vote of 14 to 12.

The next step will be for the Senate to take up the Tax Bill after Thanksgiving break as a “Reconciliation Bill” pursuant to the budget that the House and Senate adopted this fall. This allows the Senate to pass its tax reform bill as an expedited, privileged measure needing only a simple majority (versus 60 votes required under regular order). However, as evidenced by the vote on the Affordable Care Act this past summer, Senate Republicans may have a challenging time mustering 50 votes from their 52 members.

The House and Senate rewrites of the tax code are similar, though different. Both seek to reduce the corporate income tax from 35 percent to 20 percent. Both bills seek to double the standard deduction and reduce itemized deductions. Both bills eliminate state and local income tax deductions, though the House bill still allows the deductibility of state and local real estate taxes up to $10,000.

Both bills allow the deductibility of charitable contributions to continue. The Senate leaves the mortgage interest deduction in place and allows deductibility for second homes, though the House states that mortgage interest is capped to mortgage debt of $500,000 and allowed only for a principal residence.

Both bills eliminate the Alternative Minimum Tax. Both bills reduce the rates of individual tax brackets, and the House bill reduces the number of categories. The Senate bill eliminates the mandate in the Affordable Care Act (ACA) for individuals to be covered by health insurance.

The Senate Finance Committee brought the ACA into the debate as the individual mandate has been deemed a tax and is contained in the Code. The House did not address this issue. See this article for a comparison and analysis of the two bills and this article for a chart that offers a side-by-side comparison of provisions in the two bills.

If the Senate can muster 50 votes for passage of the bill, or the bill as amended, then the House and Senate will iron out differences in a conference committee. Republicans have argued that the tax bills provide relief for all Americans who currently pay taxes, and seeks to help the middle class. They argue their bills focus on competitiveness and job creation. Democrats argue that the bills are focused on the rich, companies and not on the middle class and poor. The Administration is almost certain to sign into law any tax reform measure that is agreed to by both the House and Senate.