The House Republicans actually did manage to get a tax cuts bill together, or at least the draft of one that is subject to a lot of change as various lobbyists start ramping up the pressure, now that the broad outlines are out there in public. In the broadest terms, blue states and their residents are losing, corporations and really rich families—and Donald Trump in particular—are winning. Here's some of the lowlights.
It chops the corporate tax rate from 35 percent to 20 percent. Corporations are really the biggest winners here. It keeps the top bracket of 39.6 percent for high-income households, but raises the income threshold for that rate to $1 million for married couples. It compresses the remaining individual brackets from six into four—to 12 percent, 25 percent and 35 percent. It doesn't mean drastic changes on the straight income tax level for the middle class (it really helps the wealthy), but the devil shows up in details, particularly in a bill that's supposed to be helping the middle class.
- Want a new house? If you're in a big city or a blue state, you'd be screwed. It limits the mortgage tax deduction of $500,000 for new home purchases. Existing mortgages will be grandfathered. The realtors are already fighting that one, as are the homebuilders. Just the release of the plan was an immediate and huge hit to them on the S&P exchange.
- Have a student loan? Bad news. It repeals the deduction for student-loan interest.
- Have high medical costs? You're hit, too. It repeals the itemized deduction for medical expenses.
- Have children? The child tax credit would be increased from $1,000 to $1,600, though the $4,050 per child exemption would be repealed. In return, it creates a new $300 credit for each person in a filer’s family who isn’t a child. But that tax credit expires in six years. Note that none of the breaks that corporations are getting will ever expire.
- Do you want to adopt a child? You won't get a tax break. It repeals the tax credit for that, because family values.
- How about charitable giving? It keeps that deduction, BUT nearly doubles the standard deduction, from $12,700 to $24,000 for married couples filing jointly. That's potentially bad news for charities—higher standard deduction means less incentive for charitable giving so that people can itemize deductions for a bigger break.
- Pay a lot in local taxes? Bad news here, too. It repeals the deduction for state and local income and sales taxes. You would still get a deduction for property taxes, up to $10,000.
Jam the phone lines of House Republicans to make sure they can't pass the tax bill. Call your House member at (202) 224-3121, and tell them NO on the Republican tax plan that showers more breaks on the wealthy.
It really helps corporations and the very rich, and of course Donald Trump.
- Almost all of the cuts go to corporations, in that corporate tax rate cut from 35 percent to 20 percent. But they also gain in income earned abroad which will either be not taxed at all, or taxed at a much lower rate than 20 percent. This, of course, trickles down the wealthy and very wealthy who earn a disproportionate share of their income from capital like stock sales and dividends.
- The just wealthy and not ultra wealthy—people making in the mid- to high-six figures—move down a bracket to a lower rate.
- The Trump Organization and other "pass through" companies, get a big break. It has some provisions which could conceivably curtail the passive owners of these companies from using them as tax shelters for their personal income, but those restrictions are limited. Trump would still come out just fine with this one.
- The alternative minimum tax, or the AMT, is repealed. The AMT has been around for four decades, and was created to make sure that really wealthy people couldn't take advantage of credits and deductions to reduce their tax bills to almost nothing. The AMT accounts for $31 million of Trump's 2005 $38 million tax bill. (We only know about his 2005 taxes—he hasn't released any other returns.)
- The estate tax is phased out—reduced by increasing the exemption and applying it to a smaller set of the very wealthy—then repealed entirely in six years.
This is a draft and is going to subject to a lot of change now that the proposals are actually out there on paper and the various interest groups—and us!—will start making noise about it. Already you have grousing from the maniacs that it doesn't include any Obamacare repeal, and the deficit peacocks and powerful groups like the small-business lobby.