Republicans unveiled on Friday at 5:30 p.m., their final, compromise plan to rewrite the tax code along with the regular barrage of lies and deceptions.
A few highlights from the tax bill at docs.house.gov/… are shown below.
Tax rates and threshold amounts shown in the table are for tax year 2018.
Item |
GOP Tax Plan |
Current Law |
Corporate Tax Rate |
21% |
35% |
Tax rules for Multinationals |
Territorial system. Overseas profits are taxed in foreign country, not US. Complex rules …
Will encourage offshoring of businesses and profits- fortune.com/...
|
|
Business Pass-through income |
First 20% is tax-free |
|
Estate Tax |
Doubles exemptions to $11M and $22M |
|
Carried interest loophole for hedge fund managers
|
Retained |
|
Obamacare Mandate |
Repealed
13 million Americans lose health insurance by 2027, and 10% higher premiums in individual market. Assuming cost-sharing reductions (CSRs) will be fully funded. www.cbo.gov/...
|
|
Tax Rates and Brackets |
7 brackets
Slightly lower rates
Top rate 37%
|
Top rate 39.6% |
Standard Deduction |
$12,000 and $24,000 |
$6,500 and $13,000 |
Personal Exemptions |
Repealed |
$4,150 per person.
$16,600 for a family of 4
|
Child Tax credit |
$2,000 per child
Max refundable amount = $1,400 per child
Refundable amount limited to 15% of earnings over $3,000
Not adjusted for inflation
|
$1,000
Refundable amount limited to 15% of earnings over $3,000
Not adjusted for inflation
|
State and local tax deduction (SALT). Also property and sales taxes. |
Limited to $10,000 combined
Same limit for individual and married couples
$10,000 value not indexed to inflation?
|
No limit (AMT deletes SALT deduction) |
Mortgage Interest deduction |
Capped at $750,000 loan amount |
Limit = $1M loan amount |
Medical Expenses deduction |
Threshold temporarily reduced from 10% of AGI to 7.5% for tax years 2017 (yes) and 2018
|
Threshold = 10% of AGI |
Student tuition waiver |
Tax-free status retained |
|
Student loan interest deduction |
Retained |
|
Credits for Solar energy, electric cars |
Retained |
|
Deduction of moving expenses |
Repealed |
|
Deduction of alimony payments |
Repealed for divorces after 2018
Recipient will not pay taxes on alimony
|
Payer gets deduction
Recipient pays taxes
|
Exclusion for employer-provided bicycle commuter
fringe benefit |
Repealed (out of spite) |
|
Deduction for casualty loss (fire, flood, burglary, etc) |
Only if disaster is declared by president
(expect blue states to get punished)
|
Disaster is disaster |
Deduction of Tax preparation fees |
Repealed |
|
Individual AMT |
Retained
Higher exemption amounts
|
|
Corporate AMT |
Repealed |
|
Inflation Index |
New lower index using chained CPI
Effectively raises taxes over time, but increasing standard deduction, thresholds, credits, etc. more slowly
|
|
Johnson amendment |
Retained
(Charitable organizations may not participate in any political campaign ..)
|
|
Sunset |
Most individual tax changes expire/reset after 2025. Tax year 2026 will use current law.
Corp. tax rates and chained CPI are permanent.
Hence, standard deduction an exemptions will effectively be lower in 2026 than the current values
|
|
Estimated additional deficit |
$1.455T over 10 years — www.cbo.gov/…
(This is on top of the approximately $10T projected deficit under current law)
|
|
Oil drilling in ANWR |
Drill baby drill |
|
Number of pages in conference report |
1,097 |
|
Automatic cuts to Medicare in budget |
Very likely
Pay-as-you-go rules apply
|
|
Cuts to social programs |
Next up; stay tuned ... |
|
Tax Brackets
TAXABLE INCOME |
2018 Current Law |
GOP TAX PLAN |
0 - 19,050 |
10% |
10% |
19,050 - 77,400 |
15% |
12% |
77,400 - 156,150 |
25% |
22% |
156,150 - 165,000 |
28% |
22% |
165,000 - 237,950 |
28% |
24% |
237,950 - 315,000 |
33% |
24% |
315,000 - 400,000 |
33% |
32% |
400,000 - 424,950 |
33% |
35% |
424,950 - 480,050 |
35% |
35% |
480,050 - 600,000 |
39.6% |
35% |
600,000+ |
39.6% |
37% |
A Simple Tax Example
Here is a simplistic tax calculation for a family with two children using standard deduction. This example is similar to what Paul Ryan has been peddling.
|
Current Law 2018 |
GOP Tax Plan 2018 |
Income |
60,000 |
60,000 |
Std deduction |
13,000 |
24,000 |
Exemptions |
16,600 |
0 |
AGI |
30,400 |
36,000 |
Tax |
3,608 |
3,939 |
CTC max |
8,550 |
8,550 |
CTC |
2,000 |
4,000 |
Tax |
1,608 |
(61) |
EIC |
? |
? |
Tax cut |
|
1,669 |
For a similar couple with no children below 17 years of age, the tax cut amount is $914.
Looks good; but the savings will diminish over time, as the chained-CPI slows down the increase in the standard deduction value.
Also, medical insurance costs will rise, medicare cuts will kick-in, social programs will be on the chopping block and our children will be saddled with a $1.5T hole.
Before someone points out that families making less than $60k pay no taxes, remind them that they pay SS and Medicare taxes, state taxes, sales taxes, property taxes (even if they rent, they pay it indirectly), taxes on gas, alcohol, hotels, travel and various tolls and fees.
Analysis
Senators who now support the bill
Rubio — yes
Corker — yes
Flake — ?
Lee — yes?
Collins — yes?
McCain — in hospital, but may show up to vote yes
Final Vote
The House and Senate will probably vote on Monday and Tuesday resp.
References
- Tax Bill — docs.house.gov/…
- Final CTC Changes Don’t Alter Tax Bill Basics: 10 Million Working Family Children Get Little or Nothing — www.cbpp.org/…
- What’s in the new tax bill — www.politico.com/…
- What's in the GOP's final tax plan — money.cnn.com/…
-
The Games They Will Play: Tax Games, Roadblocks, and Glitches Under the New Legislation — papers.ssrn.com/...
P.S. I am not a tax professional, so please take the descriptions and values with a grain of salt. This diary contains a high-level summary, not a comprehensive or complete description of the 1097-page tax law. If you find errors or issues that should be highlighted, please post some comments and I will update the diary.