The GOP “Tax Cuts and Jobs Act”: Behind The Headlines
by: The Knowledge GroupDecember 07, 2017
President Trump’s plan to boost the economy by overhauling the U.S. tax code is focused on tax cuts for businesses. Should it be enacted, U.S. companies will enjoy exemptions for money banked overseas, be able to repatriate money at a low tax rate of 14.5%, and receive breaks for new developments through the next five years.
The 35% top tax rate for U.S. corporations, largely considered too high, drops in the Senate bill to a permanent 20%. And 23% of the pass-through income for sole proprietorships, LLCs, partnerships, and “S” corporations would be tax-free. While Moms and Pops may celebrate, law firms and other service businesses earning more than $250,000 won’t get that deduction.
Not Floating All Boats
Until 2026, 62% of the population would see lower taxes; but the bill has drawn criticism because millionaires are among that group. Today, a decedent can bequeath up to $5.5 million in property and assets tax-free. The bill would let heirs receive $11 million without tax implications.
The bill also ends popular deductibles, including moving expenses, disaster losses, and tax preparation expenses.
The “personal exemption” of $4,050 for the taxpayer, spouse, and each dependent is gone. The standard deduction goes up to $12,000 per person, and the child tax credit rises from $1,000 to $2,000. Yet AARP deems the bill, given its changes to deductions, a net loss for older people.
Home sales will be taxed more, as sellers will now need to have resided in the home for five years, not two, to avoid taxation on up to $250,000 in gains.
Other Notable Provisions
The bill preserves the student loan deduction (but the House version deletes it, so let’s see). Environmental groups are incensed that permission for drilling Alaska’s Arctic National Wildlife Refuge appears in the bill.
Overall, itemized tax deductions are gutted. New Yorkers and other high state taxpayers will feel the pain. An up-to-$10,000 property exemption remains, as a concession to help the bill pass.
The individual mandate to purchase health insurance will stop. Expect health insurance premiums to rise by an annual 10%, warns the Congressional Budget Office, which predicts 13 million people will lose coverage within a decade. And New York Magazine has claimed Republican promises to offset this loss were never meant to be kept.
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