Understanding the New Tax Bill
Following the signing of the new GOP Tax Bill on December 22nd, feelings of anger, excitement, and confusion abounded among Americans. The nearly 500 page legislation is difficult to comprehend, especially in terms of how it will affect Americans present and future. Here is a breakdown of a few of the provisions detailed in the law, as well as how it will affect Americans.
The Law's History
The legislation, officially known as public law no. 115-97 and informally known as the GOP Tax Reform or the Tax Cuts and Jobs Act of 2017, was signed into place on December 22nd by President Trump. Prior to that, the legislation quickly cleared the House, but dealt with heavier Democratic and even Republican opposition in the Senate. Those writing the legislation worked to hastily edit and add onto the document just hours before it was to be signed in order to gain key Republican votes, leading to outcry from the Democrats that there would not be enough time to read and comprehend the material. Despite this, the vote went on, and the Senate approved the reform.
For the next eight years, corporations and the majority of Americans will all be affected by major tax cuts. Altogether, the wealthiest Americans and biggest corporations are receiving the best end of the deal and the largest tax reductions, but the deal does preserve and create benefits for working class families as well. Child tax credit doubled and made more of the tax refundable, giving working class families a boost in money provided by the government. As well as this, the estate tax shrunk and will only truly affect the ultra-wealthy, since inheritance will now only be taxed after the first $11 million given. Additionally, the alternative minimum tax (AMT), which previously affected families earning over $120,000, will now only have to be paid by a select group in the $200,000-500,000 range (paying significantly less, though) and in full by those earning $500,000 or more.
Beginning in 2026, all tax cuts for individual Americans will go away, and reductions will only remain for corporations. So, although a family may see benefits from the legislation in 2018, taxes could easily return to their previous rates or higher in 2026, which is quite disappointing. Keeping the tax cuts on profit permanent for corporations ultimately aims to grow American business, but due to various lost reductions in other aspects of enterprise, this may not succeed. As well as this, Americans will no longer be required to have healthcare in 2019, which is projected to cut government spending by $300 billion, but lead to 13 million fewer Americans with health insurance and higher premiums. Congress is planning to work on additional legislation to assure premiums will not skyrocket, however. Aside from taxes, the legislation also states that drilling is to be allowed in the Arctic National Wildlife Refuge, and it is unclear if/when this will begin.
Altogether, the legislation contains many different tax cuts for the majority of American individuals and businesses, but individuals will lose these benefits beginning in 2026. Depending on perspective, the reform can be seen as both a success or failure, considering it will lead to major tax cuts for a large group of Americans, but only briefly.
Sources & Further Reading
Long, H. (2017). The final GOP tax bill is complete: Here's what's in it. Washington Post. Retrieved from https://www.washingtonpost.com/news/wonk/wp/2017/12/15/the-final-gop-tax-bill-is-complete-heres-what-is-in-it/?utm_term=.a636f865f96e
Schoen, J. W. (2017). Here's how the final GOP tax bill would hit your wallet. CNBC. Retrieved from https://www.cnbc.com/2017/12/19/heres-how-the-final-gop-tax-bill-would-hit-your-wallet.html
Tax Cuts and Jobs Act of 2017. (n.d.). Retrieved January 6, 2018 from the Tax Cuts and Jobs Act Wiki: https://en.wikipedia.org/wiki/Tax_Cuts_and_Jobs_Act_of_2017
The Tax Policy Center. (2017). What is the AMT? In Tax Policy Center Briefing Book (Key Elements of the U.S. Tax System). Retrieved from http://www.taxpolicycenter.org/briefing-book/what-amt