XPost: alt.tv.pol-incorrect, alt.politics.usa, alt.fan.rush-limbaugh
XPost: us.taxes

On Thursday, House Republicans finally unveiled their tax reform plan.
Overall, it’s a transformative move in terms of corporate taxes, and it
should help the vast majority of individual taxpayers as well. There
are holes in it, of course — and there are serious questions to be
asked about blowing out the debt in the short term. But there’s no
question that it would be a tremendous upgrade from the current tax
system, which carries one of the highest corporate tax rates in the industrialized world and a massively complex individual tax system.

Here’s what you need to know.

1. Corporate Tax Cuts Are Slashed Dramatically. The proposal lowers the corporate tax rate from 35% to 20%. That puts America in line with the
U.K. rather than above virtually every other industrialized country.
Meanwhile, pass-through corporations will see their tax rates reduced
from 39.6% to 25%.

2. Individual Tax Rates Change, But Not An Enormous Amount. Instead of
the current seven-bracket system, the number of brackets is reduced to
four. High income earners will earn a slight reprieve for income
between $418,400 and $500,000 (the top tax bracket now kicks in at
$418,400); earnings of between $200,000 and $500,000 will be taxed at
35%, meaning a slight increase for some of those households; between
$45,000 and $200,000, tax rates will be 25%; below $45,000, the income
tax rate will be 12%.

3. The Bill Kills Medical Expense Itemized Deductions, As Well As
Adoption And Student Loan Interest. This will be the provision the
Democrats choose to target: if you have extraordinary health care
costs, some of these costs will no longer be deductible. The tax
deductions for adoption and student-loan interest also go away.

4. The Bill Limits Mortgage Deductions. The bill will reduce the amount
of mortgage interest deduction available from loans up to $1 million to
loans up to $500,000. This will particularly smash people who live in
high real estate value areas, which just happen to be blue overall.

5. Executive Compensation Becomes Less Deductible. As The Wall Street
Journal points out:

Businesses would lose the ability to deduct certain executive
compensation above $1 million, which they can now do for
performance-based pay.

That means bonuses are no longer deductible for CEO, CFO and the “three
other highest paid employees” at a company.

6. The Tax Reform Package Repeals The So-Called Johnson Amendment. The
Johnson Amendment penalizes 501(c)3 religious organizations for
supposed electioneering; now, the law will allow religious
organizations to speak politically “assuming the speech is in the
ordinary course of the organization’s business and its expenses are de minimis.”

7. The Child Tax Credit Increases…Some. While some Republicans wanted
the child tax credit increased to $1,800, the bill increases it to
$1,600. The House bill also creates a $300 tax credit for non-child
dependents, but those are phased out in 2022.

8. Removing State Tax Deductibility. Right now, you can deduct the
amount you pay in state taxes from your federal income. This bill would
remove that capacity, slamming those who live in high-tax states like
New York and California. But then again, why should the federal
government subsidize higher tax rates in leftist areas?

Overall, this would be a serious restructuring of the tax code. It’s
not enough, particularly in the individual sphere. But it’s a definite improvement.


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