Sign up for our daily briefing

Make your busy days simpler with Axios AM/PM. Catch up on what's new and why it matters in just 5 minutes.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Catch up on the day's biggest business stories

Subscribe to Axios Closer for insights into the day’s business news and trends and why they matter

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Stay on top of the latest market trends

Subscribe to Axios Markets for the latest market trends and economic insights. Sign up for free.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Sports news worthy of your time

Binge on the stats and stories that drive the sports world with Axios Sports. Sign up for free.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Tech news worthy of your time

Get our smart take on technology from the Valley and D.C. with Axios Login. Sign up for free.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Get the inside stories

Get an insider's guide to the new White House with Axios Sneak Peek. Sign up for free.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Catch up on coronavirus stories and special reports, curated by Mike Allen everyday

Catch up on coronavirus stories and special reports, curated by Mike Allen everyday

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Want a daily digest of the top Denver news?

Get a daily digest of the most important stories affecting your hometown with Axios Denver

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Want a daily digest of the top Des Moines news?

Get a daily digest of the most important stories affecting your hometown with Axios Des Moines

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Want a daily digest of the top Twin Cities news?

Get a daily digest of the most important stories affecting your hometown with Axios Twin Cities

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Want a daily digest of the top Tampa Bay news?

Get a daily digest of the most important stories affecting your hometown with Axios Tampa Bay

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Want a daily digest of the top Charlotte news?

Get a daily digest of the most important stories affecting your hometown with Axios Charlotte

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Sign up for Axios NW Arkansas

Stay up-to-date on the most important and interesting stories affecting NW Arkansas, authored by local reporters

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Illustration: Lazaro Gamio / Axios

The biggest rewrite of the tax code in more than 30 years is about to become a reality. Starting next year, most individual tax rates will be lower, the corporate tax rate will go down, and lots of other tax benefits will kick in.

But the Affordable Care Act will be disrupted, some medical research could suffer, and the new tax rules will require intensive planning by everyone from businesses and tech companies to the health care and energy industries.

Here's what to expect in the short term and the long term.

Individual taxes

Short term:

Across-the-board lowering of individual tax rates starting next year, including a lower top rate of 37 percent.Significant reduction in number of people who use itemized deductions, as the standard deduction is doubled and many popular write-offs are limited.Expansion of the child tax credit, which doubles from $1,000 to $2,000 and is refundable up to $1,400. Cap of up to $10,000 on state and local tax deduction, which will hit some itemizers in expensive — mainly blue — states.Threshold for mortgage interest deduction lowers from $1 million to $750,000, which could hit both high-end homeowners and homeowners in expensive markets.New 20 percent deduction for pass-through income, which will almost certainly incentivize workers to find ways to shift wages into pass-through income.Long term:Congress will have to decide in the next eight years whether to make these tax cuts permanent, which will cost trillions of dollars, or to let them expire and essentially raise rates on the middle class.

Business taxes

Short term:

  • Companies with heavy debt loads are going to need to rework their finances, and quickly, as the 100% deduction for corporate interest has been slashed.
  • Corporate tax will drop from 35% to 21%, beginning in 2018.
  • The corporate alternative minimum tax will end, also starting in 2018.

Long term:

  • Most big companies set their 2018 hiring plans before the tax plan was a sure thing. So if Republicans are correct that the bill will spur a new hiring boom, it won't become evident until at least the second half of the year.
Health care

Short term:

  • The deduction for medical expenses will expand for two years. For 2017 and 2018, people with costly medical problems will be able to deduct any expenses over 7.5% of their income, rather than the current 10%.
  • The repeal of the individual mandate will force insurers to leave the Affordable Care Act market if they believe it's no longer worth the headache, or they will jack up premiums to cover the costs of a population that likely will be sicker.
  • Individual mandate repeal will boost the ranks of the uninsured. It will mostly affect people in the individual market, who will either voluntarily leave or consider the coverage unaffordable.
  • Pharmaceutical companies are expected to bring back offshore cash to take advantage of the 15.5% repatriation tax. Wall Street advisers are licking their chops over the prospect of stock buybacks and lots of pharma mergers and acquisitions.
  • For-profit health insurers will reap huge windfalls from the large drop in the corporate tax rate and will dump a large chunk of that money back to investors. Federal law limits those profits, but they still will be substantial considering how much money insurers handle.

Long term:

  • The orphan drug tax credit, which gives drugmakers an incentive to research treatments for rare diseases, will be cut in half. Starting next year, it will only cover 25% of clinical testing expenses, rather than 50%. Watch to see if the progress in developing new treatments slows down.
  • The tax bill will cause the federal deficit to swell and therefore will enact automatic spending cuts to major health care programs unless the law forcing those cuts is waived. Medicare faces a $25 billion cut in 2018 and more over time, which would hurt beneficiaries, doctors, hospitals and other companies that rely on Medicare.
Tech

Short term:

  • Big tech companies, Apple chief among them, may take advantage of a lower rate to bring back cash and other assets they're currently holding overseas. They're already under pressure to invest that money in the United States.

Long term:

  • The switch to a so-called "territorial" tax system — where income is only taxed by the country where it is earned — will be a boon for large tech firms with significant operations outside the United States.
  • Tech firms will be able to take advantage of a permanent a tax credit for research and development.
  • If the Affordable Care Act collapses with the repeal of the individual mandate, it could have an effect on the ability of startup founders to strike out on their own and maintain health coverage.
Energy

Short term:

  • Companies will benefit from provisions including the lower overall corporate rates, the ability to quickly write off certain capital expenses, and repeal of the corporate AMT.
  • However, the bill also removes the Section 199 domestic manufacturing deduction that benefits the industry.

Long term:

  • The coastal plain of the Arctic National Wildlife Refuge will be open to oil drilling, giving companies a chance to tap would could be huge hydrocarbon resources.
  • The bill requires two lease sales within the next 10 years, including one within four years. But given the long leasing and development process, any oil commercial production there could be a decade away.
  • The bill also requires sale of a total of seven million barrels of oil from the Strategic Petroleum Reserve during fiscal years 2026-2027 to raise revenue.

Reported by Caitlin Owens, Dan Primack, Bob Herman, David Nather, David McCabe, and Ben Geman

Go deeper

9 hours ago - Health

FDA advisory panel recommends Pfizer boosters for those 65 and older

A healthcare worker prepares a dose of the Pfizer-BioNTech Covid-19 vaccine at the Key Biscayne Community Center on Aug. 24, 2021. Photo: Eva Marie Uzcategui/Bloomberg via Getty Images

A key Food and Drug Administration advisory panel on Friday overwhelmingly voted against recommending Pfizer vaccine booster shots for younger Americans, but unanimously recommended approving the third shots for individuals 65 and older, as well as those at high-risk of severe COVID-19.

Why it matters: While the votes are non-binding, and the FDA must still make a final decision, Friday's move pours cold water on the Biden administration's plan to begin administering boosters to most individuals who received the Pfizer vaccine later this month.

9 hours ago - World

France recalls ambassadors from U.S. and Australia over submarine deal

Secretary of State Antony Blinken (L), French Foreign Minister Jean-Yves Le Drian (C), and French ambassador to the U.S. Philippe Etienne. Photo: Nicholas Kamm/AFP via Getty Images

France has taken the extraordinary step of recalling its ambassadors to the U.S. and Australia after both countries blindsided their French allies with a new military pact and submarine contract, the French Foreign Ministry announced on Friday.

The backstory: While sealing an agreement with the U.S. and U.K. to acquire nuclear submarines, Australia ripped up an existing $90 billion submarine deal with France. That led senior French officials to accuse the U.S. of a "stab in the back."

Updated 9 hours ago - World

In reversal, Pentagon now says drone strike killed 10 Afghan civilians

Caskets for the dead are carried towards the gravesite as relatives and friends attend a mass funeral for members of a family that is said to have been killed in a U.S. drone airstrike, in Kabul on Aug. 30. Photo: Marcus Yam/Los Angeles Times via Getty Images

A U.S. drone strike launched on Aug. 29 killed 10 civilians in Afghanistan, including seven children, rather than the Islamic State extremists the Biden administration claimed it targeted, the Pentagon said Friday.

Why it matters: U.S. Central Command said at the time that officials "know" the drone strike "disrupted an imminent ISIS-K threat" to Kabul's airport, and that they were "confident we successfully hit the target."