Harvard Wins Reprieve, SALT Stalls: Tax Bill Winners and Losers

Dunster House on the Harvard University campus in Cambridge, Massachusetts Photo by Mel Musto /Photographer: Mel Musto/Bloomber

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(Bloomberg) — US businesses and wealthy universities scored major wins in the Senate Republicans’ version of President Donald Trump’s tax bill, while low-income Americans and clean energy providers are poised to be hit the hardest.

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The Senate bill has already sparked backlash from various GOP factions and several provisions threaten the fragile coalition that squeaked the legislation through the House by a single vote last month. 

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The legislation could still be altered before it heads to the Senate floor, where Trump can afford to lose no more than three Republicans. 

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Here’s who’s winning and losing at this stage in the tax fight.

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Winners

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Manufacturers, Banks

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The Senate would make permanent three business tax deductions that the House bill would sunset after 2029. The tax breaks include the ability to use depreciation and amortization as the basis for interest expensing, the research and development write-off and a 100% bonus depreciation of certain property, including most machinery and factories. Banks could see a surge in lending as companies have more cash freed up to invest in projects.

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Wealthy US Colleges

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Private universities that have endowments of at least $2 million per pupil would pay an excise tax of 8%, a significant decrease from the devastating 21% rate that was included in the House proposal. That’s still up from the current tax of 1.4% but it’s a more survivable outcome for universities like Harvard, Yale, Princeton and MIT. 

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Chipmakers

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The Senate bill calls for increasing an investment credit for semiconductor manufacturers to 30%. That’s up from the previous credit of 25%, giving chipmakers more incentive to spend on new facilities. Major beneficiaries of the tax credit have included Intel Corp., Taiwan Semiconductor Manufacturing Co., Samsung Electronics Co. and Micron Technology Inc.  

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Tipped Workers

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The Senate bill makes good on one of Trump’s campaign promise of no taxes on tips and overtime — to a point. Senators would cap the amount of tipped wages that can be exempt at $25,000 per individual and overtime at $12,500 per individual and $25,000 per couple. Those deductions start to phase out $150,000 in income per person.

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Foreign Investors

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Senators plan to delay and scale back a duty on investors in foreign countries with tax regimes that the US deems unfair. The provision, informally called a revenge tax because it targets countries that impose digital services levies, would be delayed until 2027 for calendar-year filers. It then raises the levy by 5 percentage points each year until it hits a 15% cap. 

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Health Insurers

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The Senate abandoned an endeavor to cut costs in the Medicare Advantage program. The move will allow lawmakers to avoid backlash from trimming the popular health insurance program that is largely relied upon by retired Americans. It’s also good news for managed care companies which benefit from the program: Humana Inc. and UnitedHealth Group Inc.