Taxes

GOP on Brink of Historic Tax Reform

With all Republicans now on board, the tax cut bill should be on Trump's desk by week's end.

Thomas Gallatin · Dec. 18, 2017

Just in time for Christmas, Republicans are poised to hand Americans an historic tax reform package. With initial holdouts — Senators Bob Corker (R-TN) and Marco Rubio (R-FL) — having now agreed to the finalized legislation, congressional Republicans plan to vote on the bill and have it on President Donald Trump’s desk by week’s end. This will mark a major milestone for both Republicans and Trump in fulfilling a major campaign promise to significantly cut taxes. Trump declared, “This is going to be one of the great gifts to the middle income people of this country that they’ve ever gotten for Christmas.” Anticipating the typical Democrat objections, Trump added, “The Democrats have … their standard sound bite. Before they even know what the bill is all about, they talk about ‘[cuts] for the wealthy.’”

So what’s in the Republicans’ finalized Tax Cuts and Jobs Act, which will lower taxes on the vast majority of Americans? Here are some of the highlights of the bill:

The biggest change, which Trump has long called for, is a significant cut to the corporate tax rate. It drops to 21% down from the current 35%.

The child tax credit, a major sticking point with Sen. Rubio, is doubled to $2,000-per-child, and the refundable tax credit is increased to $1,400 per child.

The ObamaCare mandate is eliminated. Americans will no longer be penalized for declining to purchase health insurance.

The estate tax, a.k.a. death tax, remains, but the threshold for having to pay it has doubled to $11 million for individuals and $22 million for married couples.

The alternative minimum tax (AMT) has been eliminated for corporations while the AMT threshold for individuals and families has been significantly increased up to $500,000 for individuals and $1 million for married couples.

Mortgage tax deductions decrease for any interest on loans of $750,000 and up.

What doesn’t change? The student loan interest deduction remains, as does the medical expense deduction and the graduate student tuition waver. There are no changes to 401(k)s. And the Johnson Amendment, which prohibits churches and nonprofits from endorsing political candidates, remains the same, despite earlier GOP attempts to repeal it.

As we have previously written, this tax reform represents a political Armageddon for Democrats as it cuts their political influence, primarily seen in their income redistribution practices, by restructuring power away from them. It transfers greater power back to the American people. Democrats know that, which is why they have been hollering about it being vindictive and unjust. Rather than seeking to put aside their anti-Trump antagonism and seek to work with Republicans, they essentially ceded over their power to Republicans who will reap all the accolades for spurring economic growth with this bill.

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