By Daniel Alvarez,
Money and Investing Writer
The new GOP tax plan is the first substantive tax overhaul in nearly 30 years and, could be passed much sooner than the GOP’s proposed 2018 deadline says President Donald Trump.
“I want to get it done by the end of the year, but I’d be very disappointed if it took that long,” Trump said. “It could be substantially less than that, depending on what happens when we send the bill back to the House.”
Overall, the supporters of the tax plan believe that the new tax plan is concerned with every single American tax payer to have more money in their pockets. Also Trump wants to simplify the act of filling out your taxes on a tax return. The goal is to be able to “file (tax returns) on a postcard.” This seems a bit exaggerated but nevertheless if Trump can get it down to one page it would be a success for the Trump administration.
Who will benefit and how will they benefit?
First, the wealthy will get a tax cut. They will pay only 35 percent on their income taxes (down from 39.6 percent). The bigger tax break for the rich is the elimination of the estate tax, sometimes called the “death tax.” It is the tax families currently pay when an asset like a house or ranch worth over $5.49 million is passed down to a heir after someone dies. Trump’s plan scraps this tax entirely.
The middle and lower class will be benefited by the change in standard deduction (currently $6,350 for individuals and $12,700 for married couples) as it will nearly double. This means that a married couple earning $24,000 or less or an individual earning $12,000 or less won’t pay any taxes. In theory, increasing the standard deduction should mean that more Americans pay $0 in taxes. Also the plans want to allow for more people to qualify for the Child Tax Credit, designed to help low-income working families. But it would also eliminate the “personal exemption” taxpayers can claim, blunting much of the new benefit and potentially leading some middle class households with multiple family members to pay more taxes than they currently do. It would also simplify personal tax brackets, collapsing the number from seven to three or four.
Businesses (both small and large) get major tax cuts with the goal of encouraging investment and creating jobs. The action is cutting the corporate tax rate from 35 percent to 20 percent and making it much easier for multinational companies to bring money earned overseas into the United States. Trump’s big claim is that this tax overhaul will unleash economic growth. The United States has been growing at about 2 percent a year lately, below the historic norm. Trump keeps saying this plan will unleash growth of 3 percent — or more. Economists, even those who work at Wall Street banks and for big companies, only project a modest boost to growth. Estimates range from 2.1 percent to 2.25 percent.
Politicians on the left argue that the tax reform plan are afraid that the deal disproportionally aids the rich and big businesses. Also, politicians on both sides are worried that Trumps plan of deep tax cuts will result in the ballooning of national debt, which Trump does not seem to worry about.
There are still a lot of significant details the trump administration and congress have to work out to get both sides on the same page. Democratic senators and congressmen said there was little evidence the tax plan provided any tax relief for low-income Americans, and it could not be learned how much the middle class would benefit, either.
Republicans didn’t specify what tax rates would apply to certain income levels, making it also hard to determine the framework’s impact.
On October 19th, The Senate approved the Republican-backed budget Thursday night, a major step forward for the GOP effort to enact tax cuts. The budget opens the door to expanding the federal deficit by $1.5 trillion over 10 years. Next, The House and Senate must then agree on a final version of the budget plan and adopt it. Then a tax bill would be introduced in the House Ways and Means Committee, in consultation with the Senate Finance Committee, likely in November. The House hopes to vote on the tax bill before Thanksgiving. The Senate then would aim to vote on the bill before Christmas.
A version of this article appeared in the Tuesday, October 24th print edition.
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