President Trump is expected to sign a major overhaul of the tax code after the House passed a final iteration of the bill on Wednesday. It is his first major legislative achievement and has significant implications for individuals and businesses across America.

Here are the 10 biggest things to know about the bill.

1. It’s the biggest tax overhaul in 30 years, but it’s not the biggest cut.

The Republican bill is the biggest change to the tax code since Reagan’s Tax Reform Act of 1986. It slashes the corporate and individual income rates, eliminates numerous deductions and sets up a new system for international taxation.

[The Republican tax bill was the easy part. The next debate could be much uglier]

But while it is one of the biggest tax cuts in American history — estimated at $1.5 trillion over a decade — it is not the biggest. According to a common metric — the size of the tax cut in its first two years compared with the size of the economy — the tax bill represents perhaps the fourth or fifth largest cut in modern history. It is estimated at 0.5 to 0.1 percent of gross domestic product in that period.

Biggest tax cuts since 1968, as share of GDP over first two fiscal years

-2%

0

-1

2010

1981

2012

2009

The new bill’s cuts will likely fall in this range, but comparable figures won’t be available for a while.

2003

1977

1978

1976

2008

2001

1971

-2.5%

-2.0

-1.5

-1.0

-0.5

0

2010 compromise on

extending the Bush tax cuts

Economic Recovery

Tax Act of 1981

2012 compromise to

make Bush cuts permanent

American Recovery and

Reinvestment Act of 2009

Jobs and Growth Tax

Relief Act of 2003

The new bill’s cuts would likely fall into this range, but comparable figures won’t be available for quite some time.

Tax Reduction and

Simplification Act of 1977

Revenue Act of 1978

Tax Reform Act of 1976

Economic Stimulus

Act of 2008

Economic Growth and Tax

Relief Act of 2001

Revenue Act of 1971

Sources: Jerry Tempalski, Treasury Department

2. The bill will add about $1 trillion to the nation’s debt over the next decade, after taking its economic impact into account.

Republicans have said that the tax bill will “pay for itself” in an effort to counter concerns that it will drive up the nation’s debt. The theory goes that, with lower tax rates, the economy will grow so much, and the number of dollars being taxed will increase so much, that the tax cut in the end will be revenue-neutral.

[Why Republicans shouldn’t be so optimistic their tax bill will be a big win]

Republicans haven’t offered any evidence to back up this claim, however, and multiple independent analyses have suggested that, over a decade, the tax bill will drive up the deficit by between $500 billion and more than $2 trillion. The nonpartisan Joint Committee on Taxation, Congress’s official scorekeeper, has projected the bill will increase revenue by $500 billion, meaning its overall cost will be $1 trillion.

Tax bill’s annual impact on the national budget, accounting for economic growth

+$50B

2018

$0B

2027

–$50B

–$100B

Increases

budget

deficit

–$150B

–$200B

+$50B

Decreases

budget

deficit

2018

2019

2020

2021

2022

2023

2024

2025

2026

$0B

2027

Increases

budget

deficit

–$50B

–$100B

–$150B

–$200B

Source: Joint Committee on Taxation

3. Most of the long-term benefits go to corporations.

The bill delivers a steep tax cut to corporations — from a 35 percent rate to 21 percent — and brings down most individuals’ tax rates as well. In the short term, somewhat more of the tax cut goes to individuals than businesses, but this reverses over the long term. That’s because the individual tax cuts are poised to expire in 2025 -- a move lawmakers undertook to comply with Senate rules limiting the impact of legislation on the deficit after 10 years.

The corporate tax cut is left permanent, giving businesses a big boost indefinitely into the future.

Bill’s total impact on individuals’ and corporations’ tax bills

Individuals

Corporations

Individual tax cuts expire after 2025, but

corporate cuts stay in place.

+$50B

2018

2027

$0B

–$50B

Bigger

tax cut

–$100B

–$150B

Individual tax cuts expire after 2025, but

corporate cuts stay in place.

Individuals

Corporations

+$50B

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

$0B

Bigger

tax cut

–$50B

–$100B

–$150B

Source: Joint Committee on Taxation

4. Most Americans will get an immediate tax cut, but the wealthy get much more.

Over 80 percent of Americans will get a tax cut next year under the Republican tax bill, and only 5 percent will see a tax hike. But that’s not equal across all income groups. Among those in the bottom 20 percent of earners — taxpayers earning less than $25,400 — only half will see a tax break. Most others in this group will see no change.

Middle-income taxpayers will see an average tax change of less than $1,000, while the wealthy will see the largest tax breaks. The average member of the top 1 percent will get a tax break of $51,140.

How every income group is affected in 2019, compared to current law

Income Average tax change Share getting a cut or hike (or no change)
$0 to $25,400
-$60
53.9%
1.2%
$25,400 to $48,600
-$380
86.8%
4.6%
$48,600 to $86,100
-$930
91.3%
7.3%
$86,100 to $149,400
-$1,810
92.5%
7.3%
$149,400 to $216,800
-$2,970
92.3%
7.6%
$216,800 to $307,900
-$4,550
94.4%
5.5%
$307,900 to $732,800
-$13,480
97.3%
2.7%
Over $732,800
-$51,140
90.7%
9.3%
All taxpayers
-$1,610
80.4%
4.8%
Income Share getting a cut or hike (or no change)
$0 to $25,400
53.9%
1.2%
$25,400 to $48,600
86.8%
4.6%
$48,600 to $86,100
91.3%
7.3%
$86,100 to $149,400
92.5%
7.3%
$149,400 to $216,800
92.3%
7.6%
$216,800 to $307,900
94.4%
5.5%
$307,900 to $732,800
97.3%
2.7%
Over $732,800
90.7%
9.3%
All taxpayers
80.4%
4.8%

5. In the long run, most Americans will see no tax cut or a tax hike.

Many of the breaks for individuals are set to expire in the coming years. Republicans set those expiration dates to comply with Senate limits on how much their legislation could add to the nation’s deficit, and they say a future Congress will extend the cuts or make them permanent. But other, permanent provisions will affect the taxes of some Americans automatically.

The elimination of the Affordable Care Act’s mandate that individuals buy health insurance or pay a fine (as explored further below) is considered a tax hike because it means fewer people who are eligible for federal health subsidies will sign up for health insurance. The legislation also adopts a new formula for calculating inflation in the tax code. The formula, while considered more accurate, would lead more people to enter high-tax brackets faster.

The loss of the individual mandate provision mainly affects low- and moderate-income taxpayers, while the inflation formula affects all taxpayers, with a more pronounced effect for households of more moderate means. The wealthy continue to get benefits in the long-run because of the permanent changes to the corporate tax code, which tend to flow through to higher-income earners.

How every income group is affected in 2027, compared to current law

Income Average tax change Share getting a cut or hike (or no change)
$0 to $28,100
+$30
11.1%
32.6%
$28,100 to $54,700
+$40
23.3%
57.7%
$54,700 to $93,200
+$20
24.4%
69.7%
$93,200 to $154,900
-$30
33.2%
64.2%
$154,900 to $225,400
-$100
38.1%
60.5%
$225,400 to $304,600
-$190
50.2%
48.7%
$304,600 to $912,100
-$1,010
58%
41.5%
Over $912,100
-$20,660
75.9%
23.8%
All taxpayers
-$160
25.2%
53.4%
Income Share getting a cut or hike (or no change)
$0 to $28,100
11.1%
32.6%
$28,100 to $54,700
23.3%
57.7%
$54,700 to $93,200
24.4%
69.7%
$93,200 to $154,900
33.2%
64.2%
$154,900 to $225,400
38.1%
60.5%
$225,400 to $304,600
50.2%
48.7%
$304,600 to $912,100
58%
41.5%
Over $912,100
75.9%
23.8%
All taxpayers
25.2%
53.4%

Highlighting in the 2027 chart is by income percentile. The TPC analysis accounts for the fact that people your current income percentile will have a higher average income by 2027.

6. Blue states benefit less than red states in the legislation.

The tax bill eliminates the ability of taxpayers to deduct more than $10,000 in state and local taxes from their federal tax returns. This is one of the biggest changes in the bill and one that could significantly increase the tax burden of people who itemize their deductions — most likely people in the upper-middle or upper class.

Blue states, and especially big cities in blue states, tend to be both higher-taxed and wealthier, meaning people there could be hit the hardest.

Average SALT deduction by county

$0

$1K

$2K

$3K

$4K

$5K

No data

$0

$1K

$2K

$3K

$4K

$5K

No data

Portland

Minneapolis

Boston

Salt Lake City

New York City

Chicago

San Francisco

Denver

Washington, D.C.

Los Angeles

Atlanta

$0

$1K

$2K

$3K

$4K

$5K

No data

Portland

Minneapolis

Boston

New York City

Chicago

Philadelphia

Salt Lake City

San Francisco

Washington, D.C.

Denver

Los Angeles

Atlanta

Source: Tax Foundation

7. It would benefit some industries more than others.

Some of the bill’s biggest changes come up in the corporate side of the tax code, where the overall rate is lowered and various provisions are scaled back or changed. Some industries fare much better than others as a result of those changes.

Change in effective corporate tax rate in 2018, by industry

0%

10%

20%

30%

New bill

Current law

All industries

Agriculture

Health care

Education

Utilities

Transportation

 

Construction

Retail trade

Arts and

entertainment

Real estate

Finance and

insurance

Wholesale

trade

 

Admin & waste

management

Technical

services

Information

Manufacturing

Holding

companies

Mining

Hotel and

food services

0%

10%

20%

30%

All industries

New bill

Current law

Agriculture, forestry,

fishing and hunting

Health care and

social assistance

Educational services

Utilities

Transportation

and warehousing

Construction

Retail trade

Arts, entertainment

and recreation

Real estate, rental

and leasing

Finance and insurance

Wholesale trade

Administrative/support,

waste management

Professional, scientific,

and technical services

Information

Manufacturing

Holding companies

Mining

Accommodation and

food services

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8. It takes away a key part of the Affordable Care Act.

The Congressional Budget Office projects that 13 million more people will be uninsured in a decade because of Republicans’ decision to eliminate the individual mandate. While some of that decline will come from people signing up for insurance plans on the Affordable Care Act marketplaces, it will also come from fewer people signing up for Medicaid, the insurance program for the poor.

Number of uninsured people, compared with current law

13M

12M

8M

4M

0

2018

2021

2024

2027

more people will be uninsured than under

current law.

13M

12M

8M

4M

0

2018

2021

2024

2027

9. It’s politically unpopular, but Republicans thought they needed to pass it.

Republicans, despite controlling both chambers of Congress and the presidency for almost a year, had not scored any major legislative victories before the tax bill. That, in addition to their base’s and donors’ desire to cut taxes, put serious political pressure on the party to get the tax bill through.

[What Marco Rubio got for his tax vote]

In the end, though, they passed an unpopular bill. Though Republicans largely supported it, Democrats and independents, who together make up the bulk of the electorate, opposed it.

Q: From what you have heard or read, do you approve or disapprove of the Republican tax plan?

Approve

Disapprove

35%

All Americans

53%

76%

Republicans

13%

7%

Democrats

84%

33%

Independents

52%

Approve

Disapprove

of the tax bill

of the tax bill

35%

53%

All Americans

76%

13%

Republicans

7%

84%

Democrats

33%

Independents

52%

No opinion not shown. Source: CBS news poll, Dec. 3-5, 2017.

Much of that disapproval probably stems from people’s beliefs about who the tax cut would help versus who it would hurt. People, on average, saw the bill helping the wealthy and big corporations but hurting people in the lower and middle classes. Most strikingly, only a quarter of people thought it would help their own family.

Q: Do you think the Republican tax plan will help, hurt, or have no effect on each of the following?

Help

Hurt

24%

You and

your family

44%

76%

Large

corporations

5%

69%

Wealthy

Americans

8%

66%

Wall Street

investors

6%

64%

Large political

donors

6%

34%

Small

businesses

41%

31%

Middle-class

Americans

46%

24%

Poor

Americans

55%

help ...

hurt ...

The bill will

The bill will

24%

44%

You and your family

76%

5%

Large corporations

69%

8%

Wealthy Americans

66%

6%

Wall Street investors

64%

6%

Large political donors

34%

41%

Small businesses

31%

46%

Middle-class Americans

24%

55%

Poor Americans

No opinion not shown. Source: CBS news poll, Dec. 3-5, 2017.

10. The tax plan sets up years of future decisions for Congress.

Many of the provisions in the bill have expiration dates, most notably the tax cuts for individuals at the end of 2025. Before each of these measures expires, Congress will have to decide whether to extend the policy into the future.

Provisions set to expire:

  • Individual tax rates and brackets
  • Personal exemption repealed
  • Pass-through business income deduction
  • State and local tax deduction capped at $10,000
  • Business investment write-off
  • Child tax credit doubled
  • Estate tax exemption doubled
  • Alternative minimum tax narrowed

Additional design work by Andrew Van Dam.

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