While some of the scarier bits that had been floated as ideas have gone away, there, still plenty of goofiness in this plan, which largely benefits the most wealthy, because that’s what they paid for with the GOP.
It’s worth noting that none of this is final — further GOP negotiations (on the Right, with business interests, etc.) will continue to evolve what’s in there — maybe getting rid of some bad stuff, maybe slipping some other bad stuff back in. But in summary, the GOP’s proposal include the following:
1. The standard deduction and child tax credit have gone way up. This will make itemization of less interest to people, both simplifying their taxes and impacting (negatively) things like charitable institutions. Wealthier individuals will likely still itemize.
2. No changes to 401(k) — which had been one of the less sane ideas suggested by some in Congress (but keep your eyes open for it to show up as a negotiating point).
3. Fewer tax brackets. Interestingly, the top bracket of 39.6% is still in there. However, the dollar figures for when the brackets kick in are missing, which strikes me as an odd way to try and make it clear how much money will be brought in.
4. Corporate taxes get cut from 35% (which nobody ever pays) to 20% (which savings will go to dividends, not new jobs and investment, based on all historic precedent).
5. The Alternative Minimum Tax goes away, which means rich people are likely to pay even less in the way of taxes.
6. Mortgage interest deductions will be capped at $500K (down from $1M), though existing homeowners will have theirs grandfathered in. Home building companies and real estate firms are already passing out the torches and pitchforks here.
7. The medical expense deduction goes away. This most directly impacts people who have significant out-of-pocket expenses, at a time when the GOP is in parallel trying to kneecap federal assistance for health care costs and insurance.
8. The estate tax largely goes away. The estate tax impacted a small number of very wealthy families, but those are the GOP’s bread and butter. Therefore, the exemption from the tax will go from $5.5 million to $11 million (i.e., you can make that much before any tax is levied on the remainder), and the tax as whole gets eliminated in six years. This will make many rich people very happy (including Donald Trump), which was the intent.
9. State and local tax deductions are largely eliminated, which hits states which have an income tax or use property and state taxes to fund state services. The new bill only allows property taxes to be exempted, capped at $10K.
The bill, as is, is expected to add $1.5 trillion to the federal debt … unless Newt Gingrich is right and all those tax savings will trickle down into spectacular new jobs and economic growth that causes tax revenues to skyrocket because everyone is making so much money, in which case there will be no debt increases and everyone will get a pony (no they won’t, because that would be socialism, but no doubt everyone will be able to afford a pony, just like all of Newt’s best friends).
See also:
— https://www.washingtonpost.com/business/economy/republican-tax-plan-to-lower-cap-on-mortgage-interest-deduction-to-500000-loans/2017/11/02/c0f594d6-bfd5-11e7-8444-a0d4f04b89eb_story.html
— https://www.nytimes.com/2017/11/02/us/politics/tax-plan-republicans.html
Republicans formally roll out tax plan — live updates – CBS News
The long-awaited plan to overhaul the nation’s tax code system is being unveiled by House Republicans Thursday
The standout to me is eliminating the medical expense offset. That seems like a particularly terrible idea. Well, so does the estate tax, but at least that doesn't hurt specific people.
+John Bump Well, it will certainly simplify doing my mothers taxes. :/
I have been able to include medical expense deductions only once in my life. If the situation in which it occurred was representative, it seems like a horrifying thing to cut.
A nice summary of winners and losers.
Oh, nifty — student loan interest will no longer be deductible. That's swell.
https://www.cnbc.com/2017/11/02/dont-celebrate-those-cuts-just-yet-this-tax-overhaul-could-leave-you-high-and-dry.html
Raising the standard deduction and simplifying is a good thing! This will reduce taxes for many in the middle class. Giving to charity should occur out of sense of duty not for monetary benefit . It’s a shame it isn’t coupled with spending cuts being they spend more than they take from us
+Bill Rabara As the article says…unless you are low income and have kids, or have medical costs, or have student loans. And in the meantime, corporations get more profits to give as dividends to investors. So my mother, on a fixed income with medical costs? Her taxes go up.
+Bill Rabara 'Giving to charity should occur out of sense of duty not for monetary benefit .'
Agreed. And, in an ideal world, people would contribute to all those worthy causes sufficiently that there would be no need for any government social safety net.
But a lot of people do give to charity in at least part because of the tax benefit. Like other parts of the tax code, the details are there to encourage certain types of spending, or saving, or other behavior that benefits the country. Eliminating those policy motives has consequences, whether it matches our ideal society or not.