Tax reform remains a hot topic for many Americans, particularly as the House passed their reform bill and the Senate will vote on their bill next week.
Here are some critical points that Americans should know about the Republicans’ proposed tax reform legislation for the inevitable Thanksgiving conversation:
1. The House and the Senate passed the budget earlier this fall, which paved the way for Republicans to use budgetary reconciliation to pass a tax reform package. Budgetary reconciliation allows Republicans to pass a tax reform bill in the upper chamber with only a simple majority.
2. House Republicans unveiled the Tax Cuts and Jobs Act in November; the bill features massive tax cuts for middle-class families and small businesses.
3. To encourage American companies to repatriate their foreign cash reserves, the Tax Cuts and Jobs Act will impose a one-time tax at a 12 percent rate on corporate profits that have been accumulated and held abroad. The bill eliminates the incentive for corporations to continue to avoid repatriating the funds and investing them in America or distributing them to shareholders.
4. Speaker Paul Ryan boasted about simplifying the tax code, claiming that 90 percent of Americans can file their taxes on a piece of paper the size of a postcard. The Tax Cuts and Jobs Act will collapse the income tax’s seven brackets into four: 12 percent, 25 percent, 35 percent, and 39.6 percent for the wealthiest Americans. The tax plan will also raise the standard deduction to $12,000 from $6,350 for individuals, and from $12,700 to $24,00 for married couples. The tax plan will also permanently and immediately cut the corporate tax rate from 35 percent to 20 percent. The House plan will also expand the child tax credit from $1,000 to $1,600 and the plan will eliminate the estate tax. The Senate version differs compared to the House bill, although the main planks of the bill are largely the same.
5. Republicans gained momentum last week when the House passed their version of the tax reform bill, almost entirely along a partisan lines. The bill received more votes than the House leadership’s Obamacare repeal bill, the American Health Care Act (AHCA).
6. The Senate Finance Committee passed their version of the Tax Cuts and Jobs Act; the Senate plans to vote on the legislation the week after Thanksgiving. The Senate tax bill includes a repeal of Obamacare’s individual mandate.
7. If the Senate passes their version of the Tax Cuts and Jobs Act, the House and Senate will have to convene a conference committee to resolve the differences between the two versions of the bill. Afterwards, both chambers of Congress will have to pass the unified tax reform bill to send the bill to President Donald Trump’s desk. Republicans hope to have the bill on Trump’s desk by the end of the year.
8. Many Republicans from high-tax, mostly Democrat states, as well as many Democrats claimed that limiting or repealing the state and local (SALT) tax deduction, will result in many middle-class Americans paying higher taxes. However, the Tax Foundation disputes that claim. Very few Americans claim the SALT deduction. Meanwhile the tax bill doubles the standard tax deduction. The Tax Foundation detailed the average states’ net jobs created and average Americans’ tax cuts thanks to the tax reform bill.
9. Despite polling that reveals that 60 percent of Americans believe the Republican tax plan favors the wealthy, the bill in fact features dramatic tax cuts for the middle-class and small businesses. The non-partisan Joint Committee on Taxation (JCT) revealed that the Senate tax plan will deliver the largest tax cuts to middle-class Americans. The JCT reported that the average tax rate for a family earning $50,000 to $75,000 would fall from 14.5 percent under current law to 13.6 percent, which is a 6.2 percent tax cut. Meanwhile, the wealthiest receive a much smaller tax cut. The average rate for a household earning more than $1 million per year would fall to 31.1 percent from 32.1 percent, merely a 2.8 percent reduction.
10. The JCT astonishingly claimed that the Senate tax bill’s repeal of the Obamacare individual mandate will result in a tax hike, rather than a tax cut. Breitbart News’ John Carney and Forbes‘ Avik Roy contend that the mandate’s repeal will end another tax through the individual mandate fine. “This isn’t a tax hike at all: it’s a voluntary foregoing of a tax credit,” Roy wrote.
11. President Donald Trump declared that the Tax Cuts and Jobs Act will be “rocket fuel for our economy.”