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GOP Releases Their ‘Big, Fat Christmas Present’ Tax Cut Plan

GOP Tax Cut Plan - Kevin Brady, Chairman of House Ways and Means Committee
Rep. Kevin Brady, Chairman of House Ways and Means Committee

It’s always been good to be rich in America but it has never been this good. With a Republican President, U.S. Senate and House, and all three branches falling over themselves to shove big fat tax cut down the throats of the wealthy – why not?



Even Donald Trump couldn’t help himself Thursday, proclaiming that the new tax cut is a “big, fat Christmas present” to Americans – wealthy Americans.

RELATED: Congressional Republicans Scared You will See Their Tax Reform Bill as Gift to the Rich.

Republicans finally unveiled their tax reform plan and as expected, it is loaded with goodies for wealthy Americans – it dramatically cuts taxes for the wealthy and corporations while eliminating deductions for middle class Americans.

The GOP tax cut plan doubles the amount of wealth exempt from death tax while postponing its full repeal to 2024. The current law affects only estates transferred by individuals worth more than $5.49 million and couples worth over $10.98 millions.




On the corporate tax rate, the GOP bill immediately slashes it from 35 percent to 20 percent. Initially, GOP senators insisted they wanted the cut phased in over time to mitigate the expected damage from the over $2 trillion cost, but President Trump insisted the cuts be immediate.

“I’m worried about ordinary Americans, middle-income people that their real asset in life is their home … and they have high property taxes,” Rep. Tom MacArthur (R-N.J.) said Wednesday.

Other features of the Republican tax cut include –

Reduction in number of income tax brackets:

Currently there are seven federal income tax brackets that are taxed at 10%, 15%, 25%, 28%, 33%, 35% and 39.6%. This will change if this bill becomes law.

The Republican bill consolidates those into four brackets –

12% on the first $45,000 of taxable income for individuals and $90,000 for married couples filing jointly

25% starts at $45,000 for individuals and $90,000 for married couples

35% starts at $200,000 for individuals and $260,000 for married couples

39.6% starts at $500,000 for individuals and $1 million for married couples



Doubling of standard deduction:

The bill will nearly double the standard deduction for singles to $12,000 from the current $6,350 and raise it for married couples filing jointly to $24,000 from $12,700.

The goal is to drastically reduce the number of people who itemize their deductions in their annual tax returns, since the only reason anyone would want to itemize their deductions is to lower their taxes if their individual deductions combined exceeds the standard deduction amount.

Elimination of personal exemptions:

This is perhaps one of the most controversial aspect of the GOP tax plan. Today you’re allowed to claim a $4,050 personal exemption for yourself, your spouse, each of your children and other allowed dependents.

The House bill eliminates that option. This will affect poor and middle class Americans who depend on this deduction to earn tax refunds. For families with three or more kids, that could completely eliminate any tax relief they might enjoy such as tax refunds.





Creation of family credit and expansion of tax credits:

The bill would increase the child tax credit most families use to help lower their annual tax burden from $1,000 to $1,600 for any child under the age of 17.

The bill also creates a new $300 tax credit for “each parent and non-child dependents.” Combined with the family tax credit, this will now be called the Family Credit.

Repealing of the estate tax:

Today the estate tax affects just 0.2% of all estates in United States, and only those with more than $5.5 million in assets (or $11 million if you leave a spouse behind) but the new bill will repeal this tax – after 2024. In the meantime, the GOP plan will double the exemption levels.





Repealing of the Alternative Minimum Tax (AMT):

Repealing the Alternative Minimum Tax (AMT) would reduce revenue to the federal government by $440 billion in the first 10 years, according to Tax Policy Center estimates but Republicans insist on repealing it despite the fact that it only affects the super wealthy.

SEE ALSO: Paul Manafort’s Daughter: ‘Trump is His New Mistress’.

The AMT was initially intended to ensure richest Americans pay at least some tax by disallowing many tax breaks. It hits typically American tax filers making between $200,000 and $1 million.

Repealing of state and local tax deductions:

The GOP tax cut plan repeals state and local tax deductions enjoyed by mostly low income and middle class Americans in states with high local tax rates, but it preserves some tax breaks.

House Ways and Means Committee chairman Kevin Brady (R-TX) had to make a concession on state and local taxes to attract lawmakers from states with high state and local tax rates. The House bill restores an itemized property tax deduction for property taxes up to $10,000. The original plan by the Republicans was to fully repeal the state and local tax deduction, which lets filers deduct their property taxes as well as their state and local income or sales taxes.



Limits deductible mortgage interest:

The Republican tax cut bill preserves mortgage deduction or existing mortgages but it lowers it for mortgages on newly purchased homes going forward. It allows you to claim a deduction for interest you pay on mortgage debt up to $500,000 – down from $1 million.

The percent of filers who claim the mortgage interest deduction is expected to fall to 4% from 21% if this becomes law.

Keeps 401(k):

After facing stiff opposition and push back from President Trump and Democrats, the Republican bill left the current 401k plan in the books as is – $18,000.

It is not clear if this tax cut plan will pass both Houses of Congress and make it to the president’s desk for his signature since most Democrats are expected to vote against the bill and Republicans remain divided about the impact of the plan on America’s debt and deficit.





“I’m worried about ordinary Americans, middle-income people that their real asset in life is their home … and they have high property taxes,” Rep. Tom MacArthur (R-N.J.) said Wednesday.

“It seems that President Trump and Republicans have designed their plan to be cheered in the country clubs and the corporate boardrooms,” New York Senator Charles Schumer said last month. Schumer is Democrats’ leader in the Senate. “[Republicans are] going to be in for a rude awakening as the American people are going to rise up against this. It’s little more than an across-the-board tax cut for America’s millionaires and billionaires.”

 

 

Associate Editor, The Liberal Advocate News

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