The final tax bill is here and it’s on the fast track to President Trump’s desk.
Late Friday evening, Congressional Republicans released the final version of their Tax Cuts & Jobs Act, a large rewrite of the American tax code with a steep cut in the corporate tax rate as its centerpiece. The release prompted Republicans like Sens. Marco Rubio of Florida and Bob Corker of Tennessee, who had previously expressed hesitation, to rally around the legislation with public support.
Both events make the bill likely to pass early next week, allowing Donald Trump to sign his first major piece of legislation after 11 months in office.
It will also be the most consequential change to the tax code in over three decades. Here’s what you, the constituent, need to know:
- The corporate tax rate will permanently decrease from 35 percent to 21 percent starting in 2018.
- Individual tax rates will decrease slightly and there will be seven brackets. The following is for someone single (if you are filing a joint return, then the income numbers go up slightly)
- 10 percent: $0 to $9,525
- 12 percent: $9,525 to $38,700
- 22 percent: $38,700 to $82,500
- 24 percent: $82,500 to $157,500
- 32 percent: $157,500 to $200,000
- 35 percent: $200,000 to $500,000
- 37 percent: $500,000 and above
- Unlike the corporate tax cuts, these income tax cuts are not permanent and would have to be reauthorized by Congress in 2025 to not change.
- Obamacare’s individual mandate will be repealed and people will no longer be penalized for not purchasing insurance. The majority of those who had been paying the penalty made under $50,000 dollars a year, according to the IRS. But 13 million fewer people are projected to have health insurance by 2027 as a result of this change, and insurance premiums will rise as healthy people forgo purchasing insurance, according to an analysis by the nonpartisan Congressional Budget Office.
- Deductions for state and local property and income taxes — which are higher in more liberal states like California and New Jersey — will now be capped at $10,000. As Republicans acknowledge, this could raise income taxes for some people in high-tax states and localities.
- The personal standard deduction will double for singles and married couples.
- The bill will increase the debt by $1.46 trillion over 10 years. Republicans argue that will be offset by economic growth spurred by the cuts but no independent, non-partisan analysis has agreed with that claim.
- Republicans restore a few popular deductions
The original versions of the tax bill from the House or Senate took away popular and sometimes life-changing deductions for items like graduate school tuition waivers, teachers buying school supplies, and high out-of-pocket medical costs. Those deductions were restored as Republicans decreased some tax breaks for businesses like deducting net operating losses and research and development. The conference committee bill also raised the tax rate on companies repatriating money from overseas to 15.5 percent, a change that helped raise approximately $40 billion over the next decade.
The bill is still very unpopular
Republicans seem undeterred by poll after poll showing their tax bill being more unpopular than popular. Here are a few of the polls:
USA TODAY/Suffolk University: 32% support; 48% oppose
Reuters/Ipsos: 31% support; 49% oppose
Quinnipiac: 29% support; 53% oppose.
And even though most Americans are likely to see at least a modest tax cut, only a third of people believe they will see one, according to a recent New York Times/SurveyMonkey survey.
Republicans seem to be arguing that more people will approve of the bill if the economy improves after it is enacted. Still, it’s risky politics for the Trump administration to make an unpopular piece of legislation it’s central policy accomplishment. The Obama administration did that with the Affordable Care Act and Democrats were wiped out in the 2010 midterms.
Democrats may try to copy past Republican strategies and use this tax bill to bolster their chances in the 2018 midterms. Sen. Bernie Sanders of Vermont, the most popular elected official among Democrats, condemned the legislation in the harshest terms Friday, calling it a “moral and economic obscenity.” In a statement, he went on to say that “It is a gift to wealthy Republican campaign contributors and an insult to the working families of our country.”
This bill has a lot of glitches
Republicans wrote this bill in record time and, partly as a result, there are a multitude of mistakes, both known and unknown. Republican Rep. Kevin Brady of Texas, one of the main authors of the bill, acknowledged Friday night that Congress would eventually have to pass fixes to improve the bill if it is passed. But such fixes would require 60 votes in the Senate and Republicans only have 52. In other words, Republicans will need Democrats’ help to fix errors in the bill.
But some Democrats have already said that the party should not vote for such fixes and that the Republicans should be stuck with whatever they pass. Democrats point out that Republicans steadfastly refused to vote for any similar patches to Obamacare.
Democratic Rep. Bill Pascrell, Jr. of New Jersey was asked by Bloomberg this week whether the party would pass fixes to the Republican plan.
“The cooperation is not forthcoming,” he said.