Posted on 12/20/2017 9:39:57 AM PST by Kaslin
The Tax Cuts and Jobs Act cuts rates for most tax brackets, substantially reduces business taxes, increases the standard deduction, and eliminates many tax loopholes and deductions.
Congress passed historic, far-reaching tax reform legislation this week, and President Donald Trump is expected to sign it into law soon after some technical fixes. The Tax Cuts and Jobs Act cuts rates for most tax brackets, substantially reduces corporate and small business taxes, increases the standard deduction for individuals and couples, and eliminates many tax loopholes and deductions.
Since Republicans first rolled out their plan to implement tax reform, liberal pundits and Democrats have created and perpetuated a number of false claims about the legislation. Some are based on earlier bills, while others were crafted out of thin air to make it as difficult as possible for Republicans and President Trump to promote their plan to help Americans keep more of their own money.
Below are four of the worst tax reform myths, alongside what’s really in Republicans’ tax reform legislation.
Perhaps the most widely repeated claim is that the Tax Cuts and Jobs Act is designed to help the wealthiest few Americans, while leaving the rest of us stuck with the bill. Nothing could be further from the truth. The Tax Cuts and Jobs Act cuts rates for nearly all seven brackets, for both singles and couples, and roughly doubles the standard deduction.
The new standard deduction will be $12,000 for individuals and $24,000 for couples. Combined, these provisions ensure the overwhelming majority of lower- and middle-income filers will get a tax break. Most lower-income people won’t be required to pay any taxes.
Further, the Tax Cuts and Jobs Act greatly improves the tax code for lower- and middle-income families with children by increasing the child tax credit from $1,000 per child to $2,000 per child. It also makes $1,400 of the tax credit refundable, which means many of those working adults with kids who don’t pay any income tax will receive as much as $1,400 per child from other taxpayers when they file their taxes, reducing the other taxes they pay (like payroll taxes).
It’s also worth noting that under current law, the child tax credit phases out beginning at $75,000 for individuals and $110,000 for couples. The Tax Cuts and Jobs Act extends the limits to $200,000 for individuals and $400,000 for couples, which means the vast majority of middle-income families will now be able to use the credit.
Anyone claiming the Tax Cuts and Jobs Act only helps rich people also ignores that cutting corporate taxes and taxes imposed on small business owners creates jobs and improves economic growth. The Tax Foundation estimates tax reform will raise wages and create 339,000 additional full-time equivalent jobs. Most of these jobs are not for the uber-wealthy, but lower- and middle-income earners. Additionally, if the tax reform provisions are made permanent (because the bill was passed using budget reconciliation, some provisions expire in a decade), the Tax Foundation claims 1.6 million additional full-time jobs will be created because of the business-friendly tax cuts in this legislation.
Slashing the corporate tax rate from 35 percent to 21 percent has the added benefit of incentivizing U.S. corporations to stay in America, rather than go overseas in search of better tax climates, as so many have done over the past few decades. This is especially good news for manufacturing workers, who have been hit particularly hard in recent years by businesses leaving for lower-wage, lower-tax nations.
The House of Representatives’ original bill eliminated a deduction that exists under current tax law and allows people to deduct out-of-pocket medical expenses incurred that surpass 10 percent of their adjusted gross income (AGI). Senate Republicans refused to agree to that provision, but that hasn’t stopped many on the Left from continuing to demonize Republicans for allegedly trying to inflict financial pain on families facing costly illnesses.
This myth is particularly absurd, because not only did the Senate refuse to eliminate the deduction, the final version of the Tax Cuts and Jobs Act passed by the House and Senate actually lowers the threshold at which people can claim the deduction, down to 7.5 percent of income. This means under Republicans’ legislation, people will be able to deduct even more of their medical expenses.
For instance, under current law, a family with an AGI of $50,000 can’t start deducting medical expenses until costs surpass $5,000. Under the Republican legislation, they could start deducting medical expenses at $3,751.
Some have suggested Republicans are using tax reform to accomplish what they couldn’t just a few months ago: eliminating Obamacare. The Affordable Care Act (ACA) is an atrocious train wreck, and I would love if this tax bill managed to end Obamacare as well as cut taxes.
Unfortunately, it doesn’t do that. The Tax Cuts and Jobs Act does, however, effectively eliminate in 2019 the penalty on people who don’t purchase “qualifying” health insurance plans. Currently, the Obamacare penalty is either 2.5 percent of household income (up to the total yearly premium for the average price of a Bronze plan) or $695 per adult plus $347.50 per child under 18 (up to $2,085), whichever is higher.
Some have said eliminating the penalty effectively ends Obamacare. They reason, based on some highly speculative estimates by the Congressional Budget Office (CBO) and others, that if people aren’t forced to buy an Obamacare plan, millions of healthy people won’t. Instead, they’ll either go without health insurance or purchase a cheaper, non-Obamacare-compliant health care insurance plan outside of an ACA exchange.
If millions of people do this, it will drive the cost of insurance up for the people left in the exchanges, most of whom (under this theory, anyway) will be sicker people. This will cause Obamacare to enter a death spiral, destroying the ACA.
There are at least two extremely problematic issues with this prediction. For starters, no one has any clue how many people will leave the Obamacare exchanges. CBO believes 13 million people will choose not to purchase insurance by 2027, but there’s literally no way to calculate this accurately. It’s just a guess—and not a very good one, either.
Further, if 13 million people do leave the exchanges, it would say a lot about just how terrible Obamacare is. No one wants sicker people to pay higher rates, but is forcing millions of people to continue to buy insurance they don’t want really the best way forward? Of course not!
Second, Obamacare is already collapsing under its own weight. Health insurers have been exiting the Obamacare exchanges as quickly as possible. According to the Centers for Medicare and Medicaid Services, 1,565 counties have only one health insurance carrier (51.43 percent of all counties) in their Obamacare exchange. Even worse, some states, such as Arizona, Iowa, and Kentucky, only have one carrier available statewide. Overall, nearly 30 percent of all Obamacare exchange participants have just one option. The Kaiser Family Foundation reports in 2014 just 6 percent of ACA participants had one choice.
If Obamacare collapses, it won’t be because of this tax reform legislation, it will be because it’s been collapsing since it went into effect. Anyone who says Obamacare would be sustainable without the Tax Cuts and Jobs Act is simply lying. With or without tax reform, Obamacare is dying and needs to be replaced.
Generally speaking, lower tax rates generate less tax revenue for the federal government. Some tax reform opponents say the Tax Cuts and Jobs Act will cost about $1.5 trillion in lost revenue, a staggering figure, especially for those of us who believe our ever-skyrocketing debt is dangerous to our nation’s long-term fiscal health and stability.
This figure, however, assumes the tax cuts will generate no economic growth. The Tax Foundation reports that when expected economic growth and expansion are included into its economic projections, the cost will actually be much closer to $448 billion over a decade, or about $44.8 billion per year. By comparison, the Obama administration spent about $1.2 trillion on its stimulus programs, most of which was spent between 2010 and 2012.
If you’re anything like me, even the modest $44.8 billion per year cost is too much to stomach. America is already in a debt crisis, so adding to it shouldn’t be an acceptable path. Yet Republicans have pledged to cut government spending next year, and $44.8 billion is only a fraction of the federal government’s massive budget. The $44.8 billion could be offset simply by eliminating government waste, leaving room for Congress to address the drivers of our national debt, namely social entitlement programs such as Medicare and Social Security.
Citizens Against Government Waste (CAGW) identified in its 2017 analysis 607 recommendations that would save taxpayers $336.2 billion in the first year alone. Sen. James Lankford (R-OK) claims in his 2017 report on federal waste that government wastes or spends inefficiently more than $400 billion. Even if only a small portion of the CAGW/Lankford waste could be identified and cut, Republicans’ tax plan could be paid for without a single meaningful government program being slashed. Then Congress could focus on addressing the true sources of our debt problem, which isn’t tax cuts but exorbitant spending.
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Must be an amateur! (using algebraic calculator? really?)
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From January 1st on, people will be keeping more of their own money.
Can’t wait for the Dems to try and spin that.
Sooner later even die hard Lefties will have to accept these cuts benefit them.
My question is does any of this bill apply to 2017 returns or is it all 2018 and up?........................
Who cares what an calculator he uses?
We will save 4800. I would have paid the same just to see the effect of the corporate tax cut and the repatriation of stranded corporate earnings.
The News said 2018
I am proud of the republicans for this bill. I am glad for the nation as it will do much good. I am middle class living in NY State. I will take a bath. I would move if not for family.
For which I have not seen one tangible item anywhere.
>-Sigh-<.....................8^(
If this tax act DOES kill Obamacare,is that a bad thing? What good does it do to have an insurance policy that is unaffordable or won’t do anything for you(except to continue to increase the premiums).
I’m glad, but disappointed also. Astonishing how much blood sweat and tears it takes for these corrupt politicians to make such small cuts.
The cuts should be MUCH greater (10-15% flat) and the brackets should disappear. Launch our economy into the stratosphere and turn the IRS into a storefront.
Much more work needs to be done. This should only be the first shot over the bow.
Analysis from Forbes below...
And here are the rates for married taxpayers filing jointly:
Income Level Current Rate Proposed New Rate
$0 - $19,050 ......10%...............10%
$19,050-$77,400 15% ............12%
$77,400-$156,150 25% ...........22%
$156,150-$165,000 28% .........22%
$165,000-$237,950 28% .........24%
$237,950-$315,000 33% .........24%
$315,000-$400,000 33% .........32%
$400,000-$424,950 33% .........35%
$424,950-$480,050 35% .........35%
$480,050-$600,000 39.6%.......35%
> $600,000 39.6%....................37%
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Journalists use toy calculators; professionals use real calculators.
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>> “I’m glad, but disappointed also. Astonishing how much blood sweat and tears it takes for these corrupt politicians to make such small cuts.” <<
Truly!
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“For which I have not seen one tangible item anywhere.”
Did you not see the 50,000 miles of orange pylons on the highways?
I thought it was an HP “Reverse Polish Notation” device, but, looking closer, I don’t see the “Enter” key.
My HP-11c that I bought in 1985 still works great!
How is it unlikely when we already have 3% growth with a predicted year end estimate of GDP growth somewhere just under 4%?
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Look closely and you’ll see the = key.
My wife has an 11c and a recent 12c. I have several 41cx and 15c’s
You have to use lots of scratch pads to use anything else!
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