Trump's Tax Plan and How It Would Affect You
House Passes Bill, Trump to Sign by Christmas
On December 15, 2017, House and Senate leaders finished drafting the final version of the Tax Cuts and Jobs Act. The bill will go to the Joint Committee on Taxation for analysis. The House passed the bill on December 19, with the Senate voting that evening. A procedural glitch requires the House to vote again on December 20. President Trump plans to sign it before Christmas.
The bill eliminates most itemized deductions. That includes moving expenses, except for members of the military.
Taxpayers can deduct up to $10,000 in state and local taxes. They must choose between property taxes and income or sales taxes.
The bill expands the deduction for medical expenses for 2018. It allows taxpayers to deduct medical expenses that are 7.5 percent or more of income. Currently, people can deduct medical expenses that are 10 percent or more. At least 8.8 million people used the deduction in 2015.
It doubles the standard deduction for everyone. A single filer's deduction increases from $6,350 to $12,000. The deduction for Married and Joint Filers increases from $12,700 to $24,000. It reverts back to the current level in 2026. As a result, 94 percent of taxpayers will take the standard deduction. The National Association of Home Builders and the National Association of Realtors opposed this. As more taxpayers take a standard deduction, fewer would take advantage of the mortgage interest deduction. That could lower housing prices. But this could be a good time to do that. Many people are concerned that the real estate market is in a bubble that could lead to another collapse.
The bill repeals the Obamacare tax on those without health insurance. Without the mandate, the Congressional Budget Office estimates 13 million people would drop their plans. The government would save $338 billion by not having to pay their subsidies. But health care costs will rise because fewer people will get the preventive care needed to avoid expensive emergency room visits. Senator Susan Collins, R-Maine, approved the final bill once Trump promised to reinstate subsidies to insurers as outlined in the Murray-Alexander bill. The $7 billion in subsidies reimburse them for lowering costs for low-income Americans. But the CBO said it won't offset the higher health care prices created by the mandate repeal.
It eliminates personal exemptions. Taxpayers currently subtract $4,150 from income for each person claimed.
It keeps the Alternative Minimum Tax. It increases the exemption from $54,300 to $70,300 for singles and from $84,500 to $109,400 for joint. The exemptions phase out at $500,000 for singles and $1 million for joint. The exemption reverts to current levels in 2026.
The bill allows parents to use 529 savings plans for tuition at private and religious K-12 schools. They can also use the funds for certain educational expenses for home-schooled students.
It allows a $500 credit for each non-child dependent. The credit helps families caring for elderly parents.
It raises the standard deduction to 20 percent for pass-through businesses. The deductions are limited once the income reaches $157,500 for singles and $315,000 for joint. Pass-through businesses include sole proprietorships, partnerships, limited liability companies, and S corporations. They also include real estate companies, hedge funds, and private equity funds.
The bill limits corporations' ability to deduct interest expense to 30 percent of income. For the first four years, income is EBITDA, but reverts to earnings before interest and taxes thereafter. That makes it more expensive for financial firms to borrow. Companies would be less likely to issue bonds and buy back their stock. Stock prices could fall. But the limit generates revenue to pay for other tax breaks.
It allows businesses to deduct the cost of depreciable assets in one year instead of amortizing them over several years. It does not apply to structures. To qualify, the equipment must be purchased after September 27, 2017, and before January 1, 2023.
The bill eliminates the corporate AMT. The corporate AMT had a 20 percent tax rate that kicked in if tax credits pushed a firm's effective tax rate below that level. For example, companies could no longer deduct research and development spending or investments in low-income neighborhood. Elimination of the corporate AMT adds $40 billion to the deficit.
It advocates a change from the current "worldwide" tax system to a "territorial" system. Under the worldwide system, multinationals are taxed on foreign income earned. They don't pay the tax until they bring the profits home. As a result, many corporations leave it parked overseas. Under the territorial system, they aren't taxed on that foreign profit. They would be more likely to reinvest it in the United States. This will benefit pharmaceuticals and high tech companies the most.
The tax bill allows companies to repatriate the $2.6 trillion in foreign cash stockpiles. They pay a one-time low tax rate of 15.5 percent on cash and 8 percent on equipment. The Congressional Research Service found that a similar 2004 tax holiday provided little boost to the economy. Companies distributed repatriated cash to shareholders, not employees. The repatriation could also raise Treasury note yields. Corporations hold most of the cash in 10-year Treasury notes. When they sell them, the excess supply would send yields higher.
The bill allows oil drilling in the Arctic National Wildlife Refuge. That's estimated to add $1.1 billion in revenues over 10 years. But drilling in the refuge won't be profitable until oil prices are at least $70 a barrel.
It retains tax credits for electric vehicles and wind farms.
It cuts the deduction for orphan drug research from 50 percent to 25 percent. Orphan drugs target rare diseases.
The bill cuts taxes on beer, wine, and liquor. The Brookings Institute estimates that will lead to 1,550 more alcohol-related deaths each year. The study found that lower alcohol prices are directly correlated to more purchases and a higher death toll.
The plans also don't include Trump's promise to end the Affordable Care Act tax on investment income.
Among individuals, it would help higher income families the most. Everyone gets a tax cut in 2019. But in 2021, taxes will increase on those making $30,000 or less. That's because the deductions and credits they lose won't make up for the lower tax rate. By 2023, costs will rise on everyone who makes less than $40,000 a year. The tax cuts expire in 2025. As a result, all income levels will pay higher taxes in 2027. That's according to the most recent analysis of the Senate plan by the Joint Committee on Taxation.
The Tax Policy Center found that taxpayers earning in the top 1 percent would receive a larger percent tax cut than those in lower income levels. By 2027, those in the lowest 20 percent would pay higher taxes.
The increase in the standard deduction would benefit 6 million taxpayers. That's 47.5 percent of all tax filers, according to Evercore ISI. But, for many income brackets, that won't offset lost deductions..
The bill ignores the lowest-income families. That's because more than 70 million Americans don't make enough to pay taxes. The plans also don't help the third of taxpayers who have incomes that fall below current standard deduction and personal exemptions, according to New York University law professor Lily Batchelder.
The final bill increases the deficit by almost $448 billion over the next 10 years. The tax cuts themselves would cost $1.47 billion. But that's offset by $700 billion in growth and savings from eliminating the ACA mandate. The Tax Foundation said the plan would boost GDP by 1.7 percent a year. It would create 339,000 jobs and add 1.5 percent to wages.
The U.S. Treasury reported that the bill would bring in $1.8 trillion in new revenue. It projected economic growth of 2.9 percent a year on average. The CBO estimates just 1.9 percent growth. The Treasury report also assumes the rest of Trump's plans will be implemented. These include infrastructure spending, deregulation, and welfare reform.
Budget-conscious Republicans have done an about-face. The party fought hard to pass sequestration. In 2011, some members even threatened to default on the debt rather than add to it. Now they say that the tax cuts would boost the economy so much that the additional revenues would offset the tax cuts. They ignore the reasons why Reaganomics would not work today.
The impact on the $20 trillion national debt will eventually be higher than projected. Congressional leaders admit that a future Congress will probably extend the tax cuts that expire in 2025.
Increase in sovereign debt dampens economic growth in the long run. Investors see it as a tax increase on future generations. That's especially true if the ratio of debt to gross domestic product is near 77 percent. That's the tipping point, according to a study by the World Bank. It found that every percentage point of debt above this level costs the country 1.7 percent in growth.
Supply-side economics is the theory that says tax cuts increase growth. The U.S. Treasury Department analyzed the impact of the Bush tax cuts. It found that they provided a short-term boost in an economy that was already weak. But the economy in 2017 is strong.
Also, supply-side economics worked during the Reagan administration because the highest tax rate was 70 percent. According to the Laffer Curve, that's in the prohibitive range. The range occurs at tax levels so high that cuts boost growth enough to offset revenue loss. But trickle-down economics no longer works because the 2017 tax rates are half what they were in the 1980s.
Many large corporations confirmed they won't use the tax cuts to create jobs. Corporations are sitting on a record $2.3 trillion in cash reserves, double the level in 2001. The CEOs of Cisco, Pfizer, and Coca-Cola would instead use the extra cash to pay dividends to shareholders. The CEO of Amgen will use the proceeds to buy back shares of stock. In effect, the corporate tax cuts will boost stock prices, but won't create jobs.
The most significant tax cuts should go to the middle class who are more likely to spend every dollar they get. The wealthy use tax cuts to save or invest. It helps the stock market but doesn't drive demand. Once demand is there, then businesses create jobs to meet it. Middle-class tax cuts create more jobs. But the best unemployment solution is government spending to build infrastructure and directly create jobs.
These increases to the debt could trigger an automatic cut in Medicare. The Pay-Go budget rule requires Congress to reduce spending on mandatory programs to offset tax cuts. The tax bill would force Congress to cut Medicare by $25 billion in 2018. It would cut mandatory programs by $150 billion over the next 10 years. Congress usually waives Pay-Go when it passes each year's budget.
The bill could help immigrants who were protected by Deferred Action for Childhood Arrivals. One of Trump's immigration policies is to end the program in March 2018. Senator Jeff Flake, R-Ariz., got Senate leaders to agree to make the program permanent in exchange for his vote.
Betty MacDonald, a very special politician and a year ago
Many ESC fans from all over the world are so very sad because we lost Joy Fleming - one of the best singers ever.
Betty MacDonald fan club founder Wolfgang Hampel sings 'Try to remember' especially for Betty MacDonald fan club organizer Linde Lund at Vita Magica September
Vita Magica Betty MacDonald event with Wolfgang Hampel, Thomas Bödigheimer and Friedrich von Hoheneichen
Betty MacDonald
Betty MacDonald forum
Wolfgang Hampel - Wikipedia ( Polski)
Wolfgang Hampel - LinkFang ( German )
Wolfgang Hampel - Academic ( German )
Wolfgang Hampel - cyclopaedia.net ( German )
Wolfgang Hampel - DBpedia ( English / German )
Wolfgang Hampel - people check ( English )
Wolfgang Hampel - Memim ( English )
Vashon Island - Wikipedia ( German )
Wolfgang Hampel - Monica Sone - Wikipedia ( English )
Wolfgang Hampel - Ma and Pa Kettle - Wikipedia ( English )
Wolfgang Hampel - Ma and Pa Kettle - Wikipedia ( French )
Wolfgang Hampel - Mrs. Piggle-Wiggle - Wikipedia ( English)
Wolfgang Hampel in Florida State University
Betty MacDonald fan club founder Wolfgang Hampel
Betty MacDonald fan club interviews on CD/DVD
Betty MacDonald fan club items
Betty MacDonald fan club items - comments
Betty MacDonald fan club - The Stove and I
Betty MacDonald fan club groups
Betty MacDonald fan club organizer Linde Lund
The final bill cuts the corporate tax rate from 35 percent to 21 percent in 2018.
The top individual tax rate will drop to 37 percent. The tax bill cuts income tax rates, doubles the standard deduction, and eliminates personal exemptions. The corporate cuts are permanent, while the individual changes expire at the end of 2025.
Here's a summary of how the plan changes income taxes, deductions for child and elder care, and business taxes. Income Tax Brackets
The final tax bill keeps the seven income tax brackets but lowers tax rates. These rates will revert to the current rate in 2026. Until then, the plan creates the following chart.| Income Tax Rate | Income Levels for Those Filing As: | ||
|---|---|---|---|
| Current | Tax Bill | Single | Married-Joint |
| 10% | 10% | $0-$9,525 | $0-$19,050 |
| 15% | 12% | $9,525-$38,700 | $19,050-$77,400 |
| 25% | 22% | $38,700-$82,500 | $77,400-$165,000 |
| 28% | 24% | $82,500-$157,500 | $165,000-$315,000 |
| 33% | 32% | $157,500-$200,000 | $315,000-$400,000 |
| 33%-35% | 35% | $200,000-$500,000 | $400,000-$600,000 |
| 39.6% | 37% | $500,000+ | $600,000+ |
The bill eliminates most itemized deductions. That includes moving expenses, except for members of the military.
Those paying alimony will
lose their deduction, but those receiving alimony will no longer be
taxed on the income. This change begins in 2019 for divorces signed in
2018.
It keeps deductions for charitable contributions, property taxes, mortgage interest, and retirement savings. It limits the deduction on mortgage interest to the first $750,000 of the loan.
Interest on home equity lines of credit can no longer be deducted. Current mortgage-holders aren't affected.
It keeps the deduction for student loan interest. Taxpayers can deduct up to $10,000 in state and local taxes. They must choose between property taxes and income or sales taxes.
The bill expands the deduction for medical expenses for 2018. It allows taxpayers to deduct medical expenses that are 7.5 percent or more of income. Currently, people can deduct medical expenses that are 10 percent or more. At least 8.8 million people used the deduction in 2015.
It doubles the standard deduction for everyone. A single filer's deduction increases from $6,350 to $12,000. The deduction for Married and Joint Filers increases from $12,700 to $24,000. It reverts back to the current level in 2026. As a result, 94 percent of taxpayers will take the standard deduction. The National Association of Home Builders and the National Association of Realtors opposed this. As more taxpayers take a standard deduction, fewer would take advantage of the mortgage interest deduction. That could lower housing prices. But this could be a good time to do that. Many people are concerned that the real estate market is in a bubble that could lead to another collapse.
The bill repeals the Obamacare tax on those without health insurance. Without the mandate, the Congressional Budget Office estimates 13 million people would drop their plans. The government would save $338 billion by not having to pay their subsidies. But health care costs will rise because fewer people will get the preventive care needed to avoid expensive emergency room visits. Senator Susan Collins, R-Maine, approved the final bill once Trump promised to reinstate subsidies to insurers as outlined in the Murray-Alexander bill. The $7 billion in subsidies reimburse them for lowering costs for low-income Americans. But the CBO said it won't offset the higher health care prices created by the mandate repeal.
It eliminates personal exemptions. Taxpayers currently subtract $4,150 from income for each person claimed.
Families with many children
would pay higher taxes under the bill despite the increased standard
deductions. For example, a married couple with two children making
$56,000 a year would pay $68 more a year.
The bill doubles the estate tax exemption to
$11.2 million for singles and $22.4 million for couples. That would
help the top 1 percent of the population who pay it. These top 4,918 tax
returns contribute $17 billion in taxes. The exemption reverts to
current levels in 2026.It keeps the Alternative Minimum Tax. It increases the exemption from $54,300 to $70,300 for singles and from $84,500 to $109,400 for joint. The exemptions phase out at $500,000 for singles and $1 million for joint. The exemption reverts to current levels in 2026.
Child and Elder Care Deductions
The final bill increases the Child Tax Credit from $1,000 to $2,000. Credit is refundable up to $1,400. It increases the income level from $110,000 to $400,000 for married tax filers.The bill allows parents to use 529 savings plans for tuition at private and religious K-12 schools. They can also use the funds for certain educational expenses for home-schooled students.
It allows a $500 credit for each non-child dependent. The credit helps families caring for elderly parents.
Business Taxes
The final tax bill lowers the maximum corporate tax rate from 35 percent to 21 percent, the lowest since 1939. The United States has one of the highest corporate tax rates in the world. But most corporations don't pay more than 15 percent. They can afford tax attorneys who help them avoid paying more.It raises the standard deduction to 20 percent for pass-through businesses. The deductions are limited once the income reaches $157,500 for singles and $315,000 for joint. Pass-through businesses include sole proprietorships, partnerships, limited liability companies, and S corporations. They also include real estate companies, hedge funds, and private equity funds.
The bill limits corporations' ability to deduct interest expense to 30 percent of income. For the first four years, income is EBITDA, but reverts to earnings before interest and taxes thereafter. That makes it more expensive for financial firms to borrow. Companies would be less likely to issue bonds and buy back their stock. Stock prices could fall. But the limit generates revenue to pay for other tax breaks.
It allows businesses to deduct the cost of depreciable assets in one year instead of amortizing them over several years. It does not apply to structures. To qualify, the equipment must be purchased after September 27, 2017, and before January 1, 2023.
The bill eliminates the corporate AMT. The corporate AMT had a 20 percent tax rate that kicked in if tax credits pushed a firm's effective tax rate below that level. For example, companies could no longer deduct research and development spending or investments in low-income neighborhood. Elimination of the corporate AMT adds $40 billion to the deficit.
It advocates a change from the current "worldwide" tax system to a "territorial" system. Under the worldwide system, multinationals are taxed on foreign income earned. They don't pay the tax until they bring the profits home. As a result, many corporations leave it parked overseas. Under the territorial system, they aren't taxed on that foreign profit. They would be more likely to reinvest it in the United States. This will benefit pharmaceuticals and high tech companies the most.
The tax bill allows companies to repatriate the $2.6 trillion in foreign cash stockpiles. They pay a one-time low tax rate of 15.5 percent on cash and 8 percent on equipment. The Congressional Research Service found that a similar 2004 tax holiday provided little boost to the economy. Companies distributed repatriated cash to shareholders, not employees. The repatriation could also raise Treasury note yields. Corporations hold most of the cash in 10-year Treasury notes. When they sell them, the excess supply would send yields higher.
The bill allows oil drilling in the Arctic National Wildlife Refuge. That's estimated to add $1.1 billion in revenues over 10 years. But drilling in the refuge won't be profitable until oil prices are at least $70 a barrel.
It retains tax credits for electric vehicles and wind farms.
It cuts the deduction for orphan drug research from 50 percent to 25 percent. Orphan drugs target rare diseases.
The bill cuts taxes on beer, wine, and liquor. The Brookings Institute estimates that will lead to 1,550 more alcohol-related deaths each year. The study found that lower alcohol prices are directly correlated to more purchases and a higher death toll.
Trump's Promises No Longer in the Plan
Trump's 2016 proposal allowed up to $2,000 to be deposited tax-free into a Dependent Care Savings Account. The account would grow tax-free to pay for a child's education. Taxpayers could also receive a rebate for the Earned Income Tax Credit and deposit it in the DCSA.The plans also don't include Trump's promise to end the Affordable Care Act tax on investment income.
How It Affects You
The tax plan helps businesses more than individuals. Business tax cuts are permanent, while the individual cuts expire in 2025.Among individuals, it would help higher income families the most. Everyone gets a tax cut in 2019. But in 2021, taxes will increase on those making $30,000 or less. That's because the deductions and credits they lose won't make up for the lower tax rate. By 2023, costs will rise on everyone who makes less than $40,000 a year. The tax cuts expire in 2025. As a result, all income levels will pay higher taxes in 2027. That's according to the most recent analysis of the Senate plan by the Joint Committee on Taxation.
The Tax Policy Center found that taxpayers earning in the top 1 percent would receive a larger percent tax cut than those in lower income levels. By 2027, those in the lowest 20 percent would pay higher taxes.
The increase in the standard deduction would benefit 6 million taxpayers. That's 47.5 percent of all tax filers, according to Evercore ISI. But, for many income brackets, that won't offset lost deductions..
The bill ignores the lowest-income families. That's because more than 70 million Americans don't make enough to pay taxes. The plans also don't help the third of taxpayers who have incomes that fall below current standard deduction and personal exemptions, according to New York University law professor Lily Batchelder.
The final bill increases the deficit by almost $448 billion over the next 10 years. The tax cuts themselves would cost $1.47 billion. But that's offset by $700 billion in growth and savings from eliminating the ACA mandate. The Tax Foundation said the plan would boost GDP by 1.7 percent a year. It would create 339,000 jobs and add 1.5 percent to wages.
The U.S. Treasury reported that the bill would bring in $1.8 trillion in new revenue. It projected economic growth of 2.9 percent a year on average. The CBO estimates just 1.9 percent growth. The Treasury report also assumes the rest of Trump's plans will be implemented. These include infrastructure spending, deregulation, and welfare reform.
Budget-conscious Republicans have done an about-face. The party fought hard to pass sequestration. In 2011, some members even threatened to default on the debt rather than add to it. Now they say that the tax cuts would boost the economy so much that the additional revenues would offset the tax cuts. They ignore the reasons why Reaganomics would not work today.
The impact on the $20 trillion national debt will eventually be higher than projected. Congressional leaders admit that a future Congress will probably extend the tax cuts that expire in 2025.
Increase in sovereign debt dampens economic growth in the long run. Investors see it as a tax increase on future generations. That's especially true if the ratio of debt to gross domestic product is near 77 percent. That's the tipping point, according to a study by the World Bank. It found that every percentage point of debt above this level costs the country 1.7 percent in growth.
Supply-side economics is the theory that says tax cuts increase growth. The U.S. Treasury Department analyzed the impact of the Bush tax cuts. It found that they provided a short-term boost in an economy that was already weak. But the economy in 2017 is strong.
Also, supply-side economics worked during the Reagan administration because the highest tax rate was 70 percent. According to the Laffer Curve, that's in the prohibitive range. The range occurs at tax levels so high that cuts boost growth enough to offset revenue loss. But trickle-down economics no longer works because the 2017 tax rates are half what they were in the 1980s.
Many large corporations confirmed they won't use the tax cuts to create jobs. Corporations are sitting on a record $2.3 trillion in cash reserves, double the level in 2001. The CEOs of Cisco, Pfizer, and Coca-Cola would instead use the extra cash to pay dividends to shareholders. The CEO of Amgen will use the proceeds to buy back shares of stock. In effect, the corporate tax cuts will boost stock prices, but won't create jobs.
The most significant tax cuts should go to the middle class who are more likely to spend every dollar they get. The wealthy use tax cuts to save or invest. It helps the stock market but doesn't drive demand. Once demand is there, then businesses create jobs to meet it. Middle-class tax cuts create more jobs. But the best unemployment solution is government spending to build infrastructure and directly create jobs.
These increases to the debt could trigger an automatic cut in Medicare. The Pay-Go budget rule requires Congress to reduce spending on mandatory programs to offset tax cuts. The tax bill would force Congress to cut Medicare by $25 billion in 2018. It would cut mandatory programs by $150 billion over the next 10 years. Congress usually waives Pay-Go when it passes each year's budget.
The bill could help immigrants who were protected by Deferred Action for Childhood Arrivals. One of Trump's immigration policies is to end the program in March 2018. Senator Jeff Flake, R-Ariz., got Senate leaders to agree to make the program permanent in exchange for his vote.
Betty MacDonald fan club founder Wolfgang Hampel sings 'Try to remember' especially for Betty MacDonald fan club organizer Linde Lund at Vita Magica September
you can join
Betty MacDonald fan club
Betty MacDonald Society
Vita Magica
Eurovision Song Contest Fan Club
on Facebook
Vita Magica Betty MacDonald event with Wolfgang Hampel, Thomas Bödigheimer and Friedrich von Hoheneichen
Vita Magica
Betty MacDonald
Betty MacDonald fan club
Betty MacDonald fan club on Facebook
Betty MacDonald forum
Wolfgang Hampel - Wikipedia ( English )
Wolfgang Hampel - Wikipedia ( English ) - The Egg and I
Wolfgang Hampel - Wikipedia ( Polski)
Wolfgang Hampel - Wikipedia ( German )
Wolfgang Hampel - LinkFang ( German )
Wolfgang Hampel - Academic ( German )
Wolfgang Hampel - cyclopaedia.net ( German )
Wolfgang Hampel - DBpedia ( English / German )
Wolfgang Hampel - people check ( English )
Wolfgang Hampel - Memim ( English )
Vashon Island - Wikipedia ( German )
Wolfgang Hampel - Monica Sone - Wikipedia ( English )
Wolfgang Hampel - Ma and Pa Kettle - Wikipedia ( English )
Wolfgang Hampel - Ma and Pa Kettle - Wikipedia ( French )
Wolfgang Hampel - Mrs. Piggle-Wiggle - Wikipedia ( English)
Wolfgang Hampel in Florida State University
Betty MacDonald fan club founder Wolfgang Hampel
Betty MacDonald fan club interviews on CD/DVD
Betty MacDonald fan club items
Betty MacDonald fan club items - comments
Betty MacDonald fan club - The Stove and I
Betty MacDonald fan club groups
Betty MacDonald fan club organizer Linde Lund
