Warning: Missing argument 2 for com\cminds\rssimporter\plugin\controllers\FeedController::com\cminds\rssimporter\plugin\controllers\{closure}() in /home3/myivy86/blackownedandoperated.org/wp-content/plugins/cm-rss-importer-pro/plugin/controllers/FeedController.php on line 170

 

Today we turn our attention to tax cuts. What are we hearing out of Washington?

We don’t have the final details of the tax cuts the Republican Congress and the White House are pursuing. On Thursday, the House and Senate passed budget legislation by a very thin margin – the vote was 216 to 212 in the House – that will allow the Republicans to pass a tax bill without any Democratic support. The final details will likely emerge this week, following that vote. But we do have a general idea of what the Republicans will pursue moving forward, and who the winners and losers will be for the proposed changes.

What are the Republicans pushing for as they move to cut taxes?

 The framework the White House released in September outlined a few key goals of their tax cut efforts. Let’s start with changes for individuals: first, they are seeking to reduce the number of tax brackets from seven to three. The taxation rate of those brackets would be 12%, 25%, and 35%, meaning the lowest tax rate would rise from 10%, and the highest tax rate would fall from 39.6%.

The proposal also calls for several current rules and deductions to be eliminated or changed. For example, the plan would increase the standard deduction, nearly doubling it to $24,000 for married taxpayers filing jointly and $12,000 for single filers. The plan would also eliminate the alternative minimum tax and deductions for state and local taxes.

Corporations would also see changes in the tax code, based the current proposal. The Republican plan seeks to lower the corporate tax rate from 35% to 20%. Smaller businesses, often called pass-through companies, would see their tax rate fall to 25%. These companies are often taxed at the individual income tax rates.

 Who are the winners under the plan at this point?

 Corporate America is very likely to benefit. Even though most corporations do not pay a full 35% of profits after deductions, the Republican’s propose tax rate of 20% means corporate America will save money. The new pass through rate for small businesses will mean that mom and pop companies, along with higher-income individuals like doctors, lawyers and some in financial services will keep more money.

The highest earners and heirs will win as well. Not only does the highest tax rate fall by 4.6%, but also because the alternative minimum tax, which was enacted to capture multimillionaires who used loopholes to pay little or nothing in taxes, will be eliminated. The estate tax is also on the chopping block. These all benefit high-income households. On the flip side, lower-income households and households with children will see some benefits. The plan doubles the standard deduction, which reduces the amount of taxed income, to $12,000 for individuals and $24,000 for married couples, making low-income taxpayers a winner, and the plan boosts the child tax credit which could be beneficial to families.

What about the losers? Who will be negatively impacted?

There are several losers under this plan. First among them, if the proposal survives intact, are taxpayers in states and localities with high income and property taxes. The plan eliminates deductions for state and local taxes, which means people living in high tax areas can no longer write these expenses off. This rule will disproportionately impact taxpayers in blue states, such as California, Illinois and New York.

There is also potential that Americans who contribute pretax income to their employer-sponsored retirement plan could lose some tax benefits. The president has come out against such a measure, but it could survive negotiations. Finally, the national debt is going to grow as government revenue plummets. Under current estimates, this tax cut proposal will see the national debt balloon by over $2 trillion dollars.

How likely are we to see these proposals pass?

That remains to be seen. As I mentioned, the margin of victory for the budget bill in the House – passing by 4 – demonstrates the challenges Congress will have passing tax cuts. Not only are Democrats opposed, but Republican members from higher tax states are opposed to the elimination of the state and local tax deductions.

That said, the White House really wants a legislative victory in the first year of this president’s administration, so there will be a lot of pressure to succeed. We will know more about the changes when the actual bill is introduced. But know this – while many Republican policymakers in D.C. are touting a $4,000 tax savings for the average American, the actual tax savings is likely in the hundreds of dollars, not thousands, for most Americans.

Your browser does not support iframes.

Like BlackAmericaWeb.com on Facebook. Follow us on Twitter and Instagram

Share your email below to receive our daily newsletter!