By the time you read this the Senate and House may have already passed what President Trump is calling a Christmas present for the nation’s middle class. It’s the much-ballyhooed tax reform bill. Trump said he will sign it into law once it hits his desk and that’s expected to happen by the end of the week.
The House votes on the bill on Tuesday and the Senate on Wednesday.
Before we get into the details of the plan — and not much has changed from previous stories we have done — it must be noted that the PIA supports a clear and simple tax code and one that reduces individual and corporate income tax rates for small businesses.
PIA National opposes tax provisions and regulations that impede small business growth.
By the way, the tax reform package has a title. It’s called the Tax Cuts and Jobs Act. The bill runs 503 pages and is — opponents contend — the tax break for the rich that President Trump said would not happen.
Treasury Secretary Steven Mnuchin disagrees. He told CNN, “This is a very large tax cut for working families.” In fact, Mnuchin said some upper income families in blue states will see taxes go up because of the cap on state and local tax deductions.
Senate Majority Whip Sen. John Cornyn of Texas said, “We give everyone in every tax bracket a tax cut. We’re going to get the economy roaring back again, improve pay, increase jobs, and make America more competitive.”
Democrats contend they were left out of the process and that Republicans did most of the work behind closed doors. Cornyn disagrees and criticized back, “Our Democratic colleagues simply refused to participate in the process — we could have made it better if they had.”
Senate Majority Leader Chuck Schumer calls the tax reforms “a spectacle, a charade, a sop to some militant, hard-right people who don’t want the government to spend money on almost anything. And it is a perilous waste of time as the clock ticks closer and closer and closer to the end of the year.”
Here are some details starting with corporations. The proposed corporate tax cut was 20% but it ended at 21%. It is the largest tax cut for corporations in history and drops it to that figure from 35%. The cuts turn to about $1 trillion over a decade.
Most businesses in this country — and you may be one of them — are pass through companies. Income from the business is “passed through” the owner’s individual tax return. The bill gives pass through businesses a 20% cut off the top and 20% of the income will be tax free.
The National Federation of Business (NFIB) did not originally support the tax reforms because they didn’t do enough for small business. The NFIB has since changed its mind and with this change it has endorsed the bill.
However, service businesses like law firms, doctor’s offices and investment companies can only take the 20% deduction if they make up to $315,000.
Two of the most controversial cuts got added back into the bill. Originally deductions for state income taxes and property taxes were taken out. A compromise capped those deductions at $10,000.
The second is the mortgage interest deduction. It stays but is going to drop from the current $1 million worth of mortgage loans to $750,000.
Most of us will see less taxes until at least 2026. Republicans did not make the cuts permanent. Tax rates — which we’ll post in a bit — drop at all income levels. The standard deduction has doubled. The president contends the typical family will save $2,000 a year. That’s probably not accurate and how much is saved will depend on the family income, family size, deductions etc.
What the bill does accomplish is dropping the number of Americans not paying taxes from 44% to 47.5%.
Also gone is the unpopular — with Republicans at least — ObamaCare individual mandate. That happens in 2019. The Congressional Budget Office (CBO) says that’s going to lead to 13 million people losing their health insurance.
The also unpopular estate tax stays but goes up considerably from $5.5 million for individuals and $11 million for couples to $22 million.
The ATM — alternative minimum tax — is gone.
Here are the new — and now likely permanent — tax brackets:
10% — $0 to $19,050
12% — $19,050 to $77,400
22% — $77,400 to $165,000
24% — $165,000 to $315,000
32% — $315,000 to $400,000
35% — $400,000 to $600,000
37% — $600,000 and above
10% — $0 to $9,525
12% — $9,525 to $38,700
22% — $38,700 to $70,000
24% — $70,000 to $160,000
32% — $160,000 to $200,000
35% — $200,000 to $500,000
37% — $500,000 and above
The standard deduction goes from $6,500 for single individuals and $12,700 for married couples filing jointly to $12,000 for individuals and $24,000 for married couples.
Source links: PIA National, The Washington Post, Reuters, MSN — link 1, link 2