by Robert Carbery
This morning, the GOP released the highlights of its proposed tax plan which will keep the 20% corporate tax cut as permanent and for a family of four making $59,000 they will get a $1,182 tax cut. The bill will keep a top rate of 39.6% for the highest income earners while doubling the standard deduction for middle class families. The child tax credit will expand from $1,000 to $1,600 and no changes are proposed to 401(k)’s or I.R.A.’s.
The plan also aims to slash the number of individual income tax brackets while also repealing the deduction for state and local income and sales taxes. A deduction for property taxes is allowed but it is capped at $10,000. In order to offset the lost tax revenue, Republican lawmakers are attempting to restrict the deductions individuals take for state and local tax payments. Deficit hawks will definitely claim that this does nothing to alleviate our mountain of debt we are racking up on a daily basis.
The Tax Cuts and Jobs Act brought to light today should be considered next week by the House Ways and Means Committee with the aim to have it become law by Christmas and for most of it to take effect in 2018.
Problems for the bill include the repeal of itemized deductions for medical expenses, which could affect households with massive healthcare costs. It also repeals the tax credit allowed for the deduction of student loan interest, of which many young Americans are still struggling under. In addition, the GOP plan would limit the home mortgage interest deduction for new home purchases, the interest would be deductible only on loans up to $500,000 which is down from $1 million.
Here are more details and the most notable changes in the bill as laid out by ZeroHedge:
- Lowers individual tax rates for low- and middle-income Americans to Zero, 12%, 25%, and 35%; keeps tax rate for those making over $1 million at 39.6%
- Increases the standard deduction from $6,350 to $12,000 for individuals and $12,700 to $24,000 for married couples.
- Establishing a new Family Credit, which includes expanding the Child Tax Credit from $1,000 to $1,600
- Preserving the Child and Dependent Care Tax Credit
- Preserves the Earned Income Tax Credit
- Preserves the home mortgage interest deduction for existing mortgages and maintains the home mortgage interest deduction for newly purchased homes up to $500,000, half the current $1,000,000
- Continues to allow people to write off the cost of state and local property taxes up to $10,000
- Retains popular retirement savings options such as 401(k)s and Individual Retirement Accounts
- Repeals the Alternative Minimum Tax
- Lowers the corporate tax rate to 20% – down from 35%
- Reduces the tax rate on business income to no more than 25%
- Establishes strong safeguards to distinguish between individual wage income and “pass-through” business income
- Allows businesses to immediately write off the full cost of new equipment
- Retains the low-income housing tax credit
The bill should get through Ways and Means in the House pretty easily as they have been working overtime lately to get this plan out to the public. After receiving a House majority a bill should be combined with a Senate tax plan as soon as next week. Democrats will likely attack this as a plan geared toward the rich, but at first this glance appears to put more money in the pockets of many Americans and allows businesses to retain more of the money they are receiving.
This is what the Trump administration has been promising since it came into office earlier this year. Tax reform is huge and affects many Americans. An overhaul of the code is very badly needed and this bill proposed by the House this morning seems to be a solid step in the right direction, budget deficits and national debt be damned!
This proposal, if implemented into law, would be the biggest transformation of the tax code in more than 30 years. But will it Make America Great Again? Let the debate begin…
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