It’s Tax Reform Time!

 

Yesterday, congressional Republicans unveiled the Tax Cuts and Jobs Act. The $1.51 trillion plan is intended to be the first major rewrite of the tax code in three decades. Republicans hope to get this to the President before Christmas.

House Ways and Means chair Kevin Brady thinks it should pass the House by Thanksgiving and it’s been designed to pass the Senate using the reconciliation process, which only requires 51 votes. And we’ve been assured that it has the “full support” of the President. (You know, until he publicly undercuts them.)

But enough throat clearing, let’s get to the details!

  • The plan has four tax brackets (down from seven): 12, 25, and 35 percent and keeps the 39.6 rate for top income earners.
  • Folks earning up to $24,000 will pay no income tax.
  • For married couples earning up to $90,000, the rate is 12 percent.
  • People making up to $260,000 will pay 25 percent.
  • For those making up to $1 million, the rate is 35 percent.
  • The top rate of 39.6 percent remains for those making above $1 million.
  • All those numbers are halved for unmarried people and those filing separately, save for the 35 percent bracket where the threshold is $200,000.
  • The standard deduction will be nearly doubled, up to $24,000 for married couples and $12,000 for individuals.
  • The child tax credit gets bumped up to $1,600 plus a $300 credit for each parent and non-child dependent.
  • There are several tax credits that get repealed as well as most itemized deductions, including for adoption, alimony, medical expenses, moving expenses, tax preparation, and local government bonds for sports stadiums.
  • The $7,500 electric-vehicle tax credit is gone.
  • The mortgage interest deduction changes. Current homeowners still have the deduction, but purchases in the future are capped at $500,000. (That’s expected to exclude about 7 million homes.)
  • The Alternative Minimum Tax (AMT) is repealed.
  • The Johnson Amendment, which prevents tax-exempt churches from endorsing political candidates, gets changed.
  • The Estate Tax exemption is doubled to $11 million and gets phased out in six years.
  • The state and local tax deduction stays, but it limits the property tax cap to $10,000.
  • The corporate tax rate is cut from 35 percent to 20 percent. This cut is designed to be permanent.
  • There will be a repatriation tax on overseas assets as high as 12 percent. It may also include a mandatory repatriation of overseas assets.
  • There will be a global minimum tax of 10 percent on income earned by American companies anywhere in the world. This is designed to keep companies from shifting profits overseas.
  • The tax rate for “pass-through” businesses is lowered to 25 percent.
  • There’s a new 1.4 percent tax for private university endowments with assets of more than $100,000 per student on their net investment income.

And there you have it. The above is a simplification of the 429-page bill, but those are the highlights. There’s lots of good stuff in there and lots of stuff for people to complain about. (The National Association of Realtors and the National Association of Homebuilders are already saying it’ll cause a housing market recession.) And stocks fluctuated yesterday based on perceived winners and losers.

Republicans were quick to remind everyone that this isn’t the final version. As Rep. Carlos Curbelo put it, “This is just the kickoff to this tax reform exercise.”


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There are 11 comments.

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  1. DocJay Inactive
    DocJay
    @DocJay

    Not the great expansive awesomeness promised but better than current for sure. Now it’s up to the senate where everyone in the GOP, except the guy with worse narcissism than Trump, should vote for it.

    This bill, if passed, will guarantee a GOP victory in the 2018 midterms.

    Immense pressure will be put on Collins and Murkowski.

    This bill certainly doesn’t benefit the uber-wealthy, or kill children, like the dems will claim.

    • #1
  2. genferei Member
    genferei
    @genferei

    The Daily Shot: There’s a new 1.4 percent tax for private university endowments with assets of more than $100,000 per student on their net investment income.

    I think I like it. It occurred to me today that De Vos cleaning up some of the college mess just extends the time the middle classes will send their offspring off to be indoctrinated: the usual conservative mistake of making leftist institutions run better.

    • #2
  3. JcTPatriot Inactive
    JcTPatriot
    @JcTPatriot

    Great information, thanks for the good Post.

    I spotted this somewhere: a tiny bracket for a special tax to stop any Democrat filibuster: The 46% Tax Bracket.

    According to the article:

    “…the surcharge could raise more than $50 billion over a decade—money that will help the GOP meet the $1.5 trillion in deficit reduction and required to balance out tax cuts elsewhere. Balancing out those costs means that the bill can pass through budget reconciliation, and Senate Democrats can’t filibuster the bill.”

    • #3
  4. I Walton Member
    I Walton
    @IWalton

    A lot not to like, but it’s better. I hope this is just the first shot and that we’ll return to real reform in the near future. Unlike Health Care, which must be swept away, partial reform doesn’t raise so many unpredictable unintended consequences. After it’s all over and passed and the economy growing conservatives should put together a real reform and start selling it so that there is hope in the near future. If they don’t do that the drift will be back toward corrupt and corrupting annual adjustments.

    • #4
  5. Larry3435 Member
    Larry3435
    @Larry3435

    Why I hate tax “reform”:

    Every time a tax bill is passed by Republicans, the Dems scream that it is a giveaway to the top 1%. They’re saying just that about this tax proposal, even though it doesn’t lower the tax rate on the top earners by one penny. So as soon as the Dems get back in control (and they always do), they will repeal all the good parts of the bill, and take the opportunity to raise income taxes on the “wealthy,” by which they mean the people who are already paying the vast majority of income taxes.

    For example, a mere six years after Reagan left office, almost all of his lower tax rates had been erased by the Bush 41 and Clinton Administrations, but none of the deductions which were eliminated as the trade off for those lower rates had been restored, and the lower tax rates for everyone who was not “wealthy” remained in effect. This ratcheting effect has happened over and over, and has increased the progressiveness of the tax code to the highest levels in our history. In practice, and over time, every “tax cut” winds up being a tax increase on those people who already bear the greatest tax burden. And it will happen to this bill as well.

    Read my lips: No new tax reform!

    • #5
  6. Valiuth Inactive
    Valiuth
    @Valiuth

    I am confused about two points. One point says people earning up to 24,000 will not pay income taxes, and then in another point there is talk of the standard deduction being raised to 24,000 for joint and 12,000 for single filing. Are there supposed to be the same thing or is there some special rule about individual earning up to 24,000?

    • #6
  7. JcTPatriot Inactive
    JcTPatriot
    @JcTPatriot

    Valiuth (View Comment):
    I am confused about two points. One point says people earning up to 24,000 will not pay income taxes, and then in another point there is talk of the standard deduction being raised to 24,000 for joint and 12,000 for single filing. Are there supposed to be the same thing or is there some special rule about individual earning up to 24,000?

    Just a wording error by Mr. Shot.

    “Folks earning up to $24,000 will pay no income tax.” – That should read “Families” earning. Although, now that I think about it, “Folks” is plural, so maybe now so much of an error after all.

    • #7
  8. BD1 Member
    BD1
    @

    I don’t think Reform Conservatives even want a corporate tax cut, but they’ll be happy that the Clinton/Obama top individual rate is now set in stone for years to come.

    • #8
  9. JcTPatriot Inactive
    JcTPatriot
    @JcTPatriot

    Larry3435 (View Comment):
    Why I hate tax “reform”:

    Every time a tax bill is passed by Republicans, the Dems scream that it is a giveaway to the top 1%. They’re saying just that about this tax proposal, even though it doesn’t lower the tax rate on the top earners by one penny. So as soon as the Dems get back in control (and they always do), they will repeal all the good parts of the bill, and take the opportunity to raise income taxes on the “wealthy,” by which they mean the people who are already paying the vast majority of income taxes.

    For example, a mere six years after Reagan left office, almost all of his lower tax rates had been erased by the Bush 41 and Clinton Administrations, but none of the deductions which were eliminated as the trade off for those lower rates had been restored, and the lower tax rates for everyone who was not “wealthy” remained in effect. This ratcheting effect has happened over and over, and has increased the progressiveness of the tax code to the highest levels in our history. In practice, and over time, every “tax cut” winds up being a tax increase on those people who already bear the greatest tax burden. And it will happen to this bill as well.

    Read my lips: No new tax reform!

    The Bush (43) Tax Cuts are still in place, except for the top tier, which Obama raised. So, it’s a small victory, but it never got repealed, which I consider to be a great victory. Plus, Obama was forced to admit that, even though he had control of the Executive and Legislative branches for his first two years, that repealing the Bush Tax Cuts (supposedly ‘for the rich’ as he said on the campaign trail) would hurt the middle class too much. He also knew, but never said, that it would put some of his poor voters back on the tax rolls. That would have been a disaster for the Democrats, as it would have proven to the Left side of America that the Bush Tax Cuts were not just “for the rich” after all.

    Somebody toiling away at $20K per year would have had their paycheck decrease by a pretty good amount on January 1st. Yeah, that 50-70 bucks might not be the end of the world for you and me, but for a guy scraping by at $20K per year, it might have convinced him to go Republican next time.

    Clinton: 15% 28% 31% 36% 39.6%
    Bush: 10% 15% 25% 28% 33% 35%
    Obama: 10% 15% 25% 28% 33% 35% 39.6%

    Bush also raised the Standard Deduction by a bunch. Rolling those back would have also hurt the poor.

    • #9
  10. DrewInWisconsin Coolidge
    DrewInWisconsin
    @DrewInWisconsin

    I like it. It’s funny that the Democrats always scream about how we need to tax the rich, but their tax plans always burden the poor. This looks like it will help our poor one-income family quite a bit and that the tax burden is beginning to be lifted from those of us who bear the weight the most.

    • #10
  11. Bob Thompson Member
    Bob Thompson
    @BobThompson

    Larry3435 (View Comment):
    Every time a tax bill is passed by Republicans, the Dems scream that it is a giveaway to the top 1%. They’re saying just that about this tax proposal, even though it doesn’t lower the tax rate on the top earners by one penny.

    This is similar to the way they use the ‘racist’ label. Eventually it loses its effectiveness and all become immune. We know who pays income taxes.

    • #11

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