GOP Tax Plan Unveils Corporate Cuts, Consolidated Tax Brackets & Cuts to Economic Development Programs

http://cedam.info/2017/11/gop-tax-plan-unveils-corporate-cuts-consolidated-tax-brackets-cuts-to-economic-development-programs/

On Thursday, November 2, House Republicans introduced their plan for tax reform. Entitled the Tax Cuts and Jobs Act, the plan cuts corporate income taxes, consolidates income tax brackets for individuals and families and makes cuts to multiple key economic development programs. Below are highlights of the GOP tax plan:

  • Permanently lowers the corporate tax rate to 20%
  • Raises the standard deduction to $12,000 for individuals and $24,000 for married couples filing jointly
  • Limits the Mortgage Interest Deduction to loans up to $500,000 on newly purchased homes going forward
  • Eliminates personal exemptions
  • Increases the child tax credit to $1,600
  • Creates two new $300 tax credits, but they would be in effect only for five years and would not be refundable. As reported by CNN Money, the credits would be for non-child dependents and for each spouse if they file jointly
  • According to CNN Politics, individuals would be able to deduct local and state property taxes, but only up to $10,000

Under the proposed plan, income tax brackets are consolidated into four:

  • 12% (on the first $45,000 of taxable income for individuals; $90,000 for married couples)
  • 25% (starts at $45,000 for individuals; $90,000 for married couples)
  • 35% (starts at $200,000 for individuals; $260,000 for married couples)
  • 39.6% (starts at $500,000 for individuals; $1 million for married couples)

Other repeals and eliminations in the plan include:

  • State and local tax deductions
  • Alternative minimum tax
  • Estate tax, phasing it out entirely in six years
  • Student loan interest deduction
  • Medical expense deduction
  • Historic Tax Credit
  • New Markets Tax Credit

The GOP tax plan specifically retains the Low Income Housing Tax Credit, but it does repeal the tax exemption for private activity bonds, including multifamily tax-exempt bonds.

As reported in the Wall Street Journal, the Johnson Amendment is also repealed allowing tax-exempt nonprofits to endorse candidates and engage in politics “so long as the charity organizations are engaging in political speech in the ordinary course of business and spending a “de minimis” amount of money on that speech.”

According to the National Low Income Housing Coalition (NLIHC), the legislation is estimated to increase the national deficit by $1.51 trillion over a decade. The NHLIC points out that increasing the deficit in this way will likely lead to deep spending cuts in the future to important domestic programs, including affordable housing and community development programs.

The goal for the House Ways and Means committee is to start considering the plan next week, with the full House considering the bill the week of November 13.

The Senate Finance Committee is expected to consider its version of the tax reform legislation, which is expected to be more moderate, the week of November 13 with a full Senate vote before Thanksgiving. After working out the differences between the two bills, Congress’ goal is to send a final version to the President by the end of the year.

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