Sunday, 23 September, 2018


GOP tax plan: Rate cuts, higher standard deduction, child credits

Paul Ryan said that the tax system would be simplified to the point that returns could be filed on a postcard Paul Ryan said that the tax system would be simplified to the point that returns could be filed on a postcard Win McNamee Getty Images
Bennie Garza | 03 November, 2017, 01:01

The bill cuts the top rate that large corporations pay from 35 percent to 20 percent, the biggest one-time drop in the big business tax rate ever. But they also showed a willingness to jettison major aspects of their plan in order to get a bill through Congress.

Republicans unveiled their bill to overhaul the USA tax code Thursday morning, and there were some major winners and losers.

A provision in the GOP's new tax bill, unveiled Thursday, would allow unborn children to have a college savings account. The estate tax, also known as the death tax, is now a 40 percent levy on estates greater than $5.49 million for individual filers or about $11 million for married couples.

As for phasing out the estate tax, Rasmussen says he'd like it to be repealed right away, "but politics is the art of the possible, and you have to weigh all these things against a huge deficit that has to figure into the overall equation".

The potential cut to limits was criticized by Democrats - and was denied by President Donald Trump before the tax reform legislation was released.

The legislation isn't without controversy.

A preliminary Tax Policy Center analysis found that business tax cuts, including a cut for small businesses and partnerships whose income is taxed on an individual basis, would cost a net $2.6 trillion.

A number of provisions in the bill would hit taxpayers in Democratic-leaning states hardest, like rolling back deductions for state and local taxes and cutting in half the popular mortgage interest deduction.

What's more, home prices - and thus, loan amounts - are much higher in pricey coastal markets like New York City, San Francisco, Boston, Los Angeles, and Washington DC. Seven out of nine NY legislators, and four out of five New Jersey ones, voted against the last budget.

Also still unresolved: How to handle possible changes to state and local tax deductions for families.

The GOP plan also seeks to eliminate the Alternative Minimum Tax, which applies to some high income earners, such as the President. But it might muddle the issue enough that some Republicans from those states might still vote for the bill.

Instead of having to pay the full cost of their taxes, state and local taxpayers who itemize their deductions can force taxpayers in lower-tax states to pick up a big portion-up to 40 percent-of their taxes.

The bill also raises revenue by eliminating the personal exemption, which allows a household to reduce its taxable income by $4,050 for each member. "With the national debt exceeding $20 trillion, we have got to do this seriously".

On paper, the bill condenses the existing seven tax brackets to just four, plus an effective fifth bracket at 0%.

Still, fiscal concerns have constrained the legislation's authors. At the moment, only estates worth over $4.49 million faced the estate tax.

"The answer is, I think we made progress on restoring the property tax deduction on state and local". The bill would increase the deduction's value for a family to $24,000. A source for a conservative organization who attended a meeting with Speaker Ryan, R-Wis., on Tuesday said they aimed for the income level to start somewhere between $750,000 and $950,000.

In the past few weeks, Republicans have admitted that their framework wouldn't necessarily give a tax cut to all middle-class households.

The original House plan would have generated more than $1 trillion from a border-adjustment tax on imports that was quashed after an outcry from Wal-Mart (WMT) and other big retailers.

Grover Norquist, an influential conservative advocate for lower taxes, said: "The tax reform bill is a tax cut and a jobs bill".

Rep. Kevin Brady, R-Tex., chairman of the House Ways and Means Committee, insisted Wednesday night that everything was "on target".

Peter Vale, tax partner in Grant Thornton, said that the headline Irish rate of corporation at 12.5 per cent would remain well below the proposed U.S. rate of 20 per cent, which when state taxes are included would rise to 25 per cent in many cases.

"Are we going to let the defenders of the status quo win and see our country continue down this downward spiral?" he asked, despite data showing about eight straight years of economic growth.

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