On Tuesday November 2nd, House Republicans presented a tax bill that seems to expand savings for high income Americans,while is decreases the economic and income benefits of middle class and working class Americans. The GOP tax proposal limits or eliminates many popular tax incentives that reduce tax liabilities for most taxpayers, especially in high-cost areas like California.
The limits on tax incentives include:
- Lowering the cap on mortgage interest deductions
- Eliminating write-offs of state income taxes
- Ending write-offs of local income taxes
- Property tax deductions capped at $10,000
- Mortgage interest deductions limited to new loans of no more than $500,000, down from the current $1 million
- Eliminating the $4,050 per-person personal exemptions that previously lowered the taxpayer bill.
As an incentive, the plan increases the standard deduction for taxpayers who don’t itemize from $6,350 to $12,000 for individuals, and from $12,700 to $24,000 for couples.
Despite efforts by some Congressional Republicans, the tax bill leaves 401(k) retirement plans untouched.
The high-income incentives include:
- Slashing the corporate tax rate to 20% from 35%
- Streamlining individual rates from seven brackets into four
New tax brackets place married taxpayers at rates of:
- 12% for married couples with income from $0 to $90,000
- 25% for married couples with income from $90,000 to $260,000
- 35% for married couples with income from $260,000 to $1 million
- 39.6% for married couples with income above $1 million
For individual taxpayers the rates are:
- 12% for an income up to $45,000
- 24% for an income from $45,000 to $200,000
- 35% for an income from $200,000 to $500,000
- 39.6% for an income above $500,000
One of Trump’s top priorities, the tax bill faces a harsh process before it meets the presidents desk, testing GOP unity in a struggle to deliver a tax proposal that will limit government, place additional tax burdens on the majority of Americans, and undoubtedly require cuts to fundamental social programs.
According to the Congressional Joint Committee on Taxation, the tax plan would add $1.5 trillion to the deficit over 10 years.
Amidst the anticipated stark economic forecast ushered in by the proposed tax bill, House Speaker Paul D. Ryan (R-Wis.) sees the plan — the most ambitious attempt to overhaul the U.S. tax code in generations — as a tax reform that would save the average American family $1,182 a year.
Senate Minority Leader Charles E. Schumer (D-N.Y.) disagrees, stating, “What we are seeing today is a plan that exacerbates the unfairness and inequality in our tax code. The Republican tax plan would put two thumbs down on a scale already tipped towards the wealthy and powerful. … Surely we can do better.”
Republicans attempt to assure Americans that the tax reform will benefit the country as a whole and help individual taxpayers. However Democrats and progressive activists plan to use the tax issue — considered to be economically poisonous by many economists — as a cornerstone advantage in the 2018 midterm elections.
For a deeper look into the GOP tax reform bill and its possible repercussions, see the LOS ANGELES TIMES: California Republicans face backlash for vote that could lead to ending property, state tax deduction, and THE MERCURY NEWS: California Republicans face backlash for vote that could lead to ending property, state tax deduction from which the principal portion of this information was derived.