President Trump signs tax reform bill into law | Chemical & Engineering News
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Web Date: December 21, 2017

President Trump signs tax reform bill into law

Changes will boost chemical industry but worry higher education officials
Department: Government & Policy
Keywords: Legislation, Drug Development, Graduate Education, tax reform, tax code, House, Senate, tuition, rare disease, orphan drug
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Senate Finance Committee Chairman Orrin Hatch (R-Utah, left) and House Ways & Means Committee Chairman Kevin Brady (R-Texas, center) shake hands after reaching agreement on tax reform legislation.
Credit: Associated Press
Photo of two men shaking hands.
 
Senate Finance Committee Chairman Orrin Hatch (R-Utah, left) and House Ways & Means Committee Chairman Kevin Brady (R-Texas, center) shake hands after reaching agreement on tax reform legislation.
Credit: Associated Press

President Donald J. Trump has signed into law the most sweeping overhaul of the U.S. tax code in 31 years. He signed the bill on Dec. 22, two days after the Republican-led Congress gave its final approval.

The bill (H.R. 1) includes a number of provisions long-sought by the chemical industry, such as slashing the corporate tax rate from the current 35% to 21% and taxing U.S.-based multinationals only on their domestic income. The House of Representatives passed it on a vote of 224-201.

“After decades enduring an outdated tax code that made U.S. businesses less competitive, our nation will soon have a modernized tax structure that promotes sustained American economic growth and new jobs,” says the American Chemistry Council, which lobbies on behalf of U.S. chemical manufacturers.

The legislation, which the Senate approved on a strict party-line vote of 51-48 early Wednesday morning, also leaves graduate students largely unscathed by preserving tax-free tuition waivers.

A provision in the original GOP House tax plan passed in early November proposed taxing as income the value of tuition waivers U.S. grad students receive when they teach courses or conduct research for their university. That set off a wave of protests at dozens of universities.

The measure was scrapped after 31 Republican lawmakers who voted for the House tax bill sent a letter to party leaders urging them to remove the provision from the final version of the legislation.

“Repeal of the income exclusion for graduate students would subject thousands of graduate students to a major tax increase at a time in their lives when they lack the ability to pay,” the lawmakers wrote.

Mary Sue Coleman, president of the American Association of Universities, says she is relieved that many of the “harmful provisions contained in the House bill” were not included in the final measure.

But she adds: “I remain troubled by certain provisions that will make higher education less accessible and less affordable. Taxing nonprofit educational institutions harms their ability to carry out the educational and research programs that serve the American public.”

The legislation also retains but cuts in half a tax credit intended to encourage biotechnology and pharmaceutical companies to develop orphan drugs to treat rare diseases that affect fewer than 200,000 people. Since 1983, companies have been allowed to write off 50% of the cost of human clinical studies to develop drugs aimed at small patient populations.

The original House bill would have killed the orphan drug tax credit entirely, while a separate Senate bill also passed in November cut the credit to 27.5% of research costs. The final bill passed by both chambers sets the tax credit to 25%.

As a result of the smaller tax credit, the National Organization for Rare Disorders (NORD) estimates that one-third fewer orphan therapies will be developed going forward.

“The cost of conducting rare disease clinical trials could rise substantially enough to discourage some biopharmaceutical companies from developing orphan therapies altogether,” says NORD, which advocates on behalf of the 30 million Americans with rare diseases.

The House had initially passed the bill on Tuesday but was forced to vote a second time after the Senate parliamentarian ruled that two provisions in the measure did not comply with budget rules and had to be stripped out. One dealt with the criteria for exemptions to a new 1.4% excise tax on investment income of private colleges and universities with endowments worth at least $500,000 per full-time student.

The deleted language would have excluded colleges with fewer than 500 tuition-paying students. The tuition paying provision was seemingly intended to help colleges with endowments large enough that students don’t pay tuition. One such college is Berea College in Berea, Ken.—Senate Majority Leader Mitch McConnell’s home state. Now the tax will apply to schools with large enough endowments and more than 500 students—Berea enrolls about 1,600—regardless of how many pay tuition.

Republicans say the tax overhaul will boost the economy by incentivizing new investments by U.S. companies and preventing jobs from being outsourced to other countries. But Democrats have lambasted the bill, arguing it primarily provides tax breaks to the wealthiest people and most profitable corporations.

UPDATE: This story was revised on Dec. 22, 2017, to reflect that President Trump signed the tax reform bill into law.

 
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Comments
Joe Cotruvo (Fri Dec 22 14:40:21 EST 2017)
The tax bill/law is not perfect, but it is a large step in the right direction. I do not know whether I will wind up paying more or less combined federal, state and local taxes, but I am hoping it will be a wash. The Democrats whining about the process should cause them to look back on the Obama Health Bill where they did not permit any republican participation or amendments, and where Nancy Pelosi famously said that she had not read the 3000 page (I think) bill before voting for it.
Complaints about the reduction of corporate taxes are really absurd. Corporations do not really pay taxes, taxes are a cost of doing business that is passed on to their customers in the price of the product.
More corporate cash means more jobs, more R&D, more facilities, lower prices, more dividends and a much better competitive position in the world market. Corporate executives are probably generally overpaid now, so let's hope they do not receive more income.Let's hope that the market place will settle that.
I am not clear on the status of the university tax consequences. Large research universities and universities with large endowments are actually businesses with competitive advantages, so their incomes should be scrutinized.
I have not seen any analyses on the inflation consequences of a large infusion of cash into the economy, such as from repatriation of foreign cash held by US corporations. It will likely increase, but how much?
Chad Brick (Wed Dec 27 12:53:17 EST 2017)
"More corporate cash means more jobs, more R&D, more facilities"

Citation, please. What it actually means are more stock buybacks, which shot up four-fold as soon as the Senate passed the bill. There is no meaningful evidence that tax cuts, isolated from the effects of additional deficit spending, are stimulative at all. Feel free to prove me wrong, with data. Note that you have to account for increased deficit spending, which (by the very definition of GDP) is stimulative. Alas, it is not sustainable, so it cannot be used as a long-term strategy.
William Rubin  (Tue Jan 02 00:10:46 EST 2018)
Chad Brick, you stated, "There is no meaningful evidence that tax cuts, isolated from the effects of additional deficit spending, are stimulative at all. Feel free to prove me wrong, with data."

Why don't you prove the rest of us with data instead of making unsubstantiated claims? Any reasonable person will agree with the statement set forth by Joe Cotruvo, unless of course, you are someone who favors big government and high taxes - someone whose vote is truly against progress.

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