Hoping for a slam dunk legislative win after multiple failed attempts to repeal the Affordable Care Act, House Republicans have come forward with a proposed tax bill that could trigger the biggest tax code overhaul in a generation. And while House Speaker Paul Ryan called the bill a win for middle-class Americans, the early-stage proposal paints a mixed picture for the nation's middle-earners.
Stay tuned, because the House plans to move the bill fast, with hopes of passing it to the Senate later this month and getting it on the president's desk by the end of the year.
Here are a few big changes to keep your eye on and what this plan could mean for you.
1. Seven income brackets become four, which would lower tax rates for many earners by increasing the range of incomes included in each bracket.
This is pretty decent news for many middle-earners making $90,000 or less, who will see their tax rate drop from 15 to 12 percent, but it's also very good news for high income earners, who, thanks to the widening of each bracket range, are looking at a notable cut.
This is especially true for earners between $480,050 and $1 million who had previously been taxed in the top, 39.6 percent bracket, and will now be taxed in the group below, at 35 percent. However, this could be tough for those earning $19,050 or less, who will see a 2 percent increase in their tax rate.
2. Bad news for blue states with higher tax rates.
Sorry New Jersey and New York. Things aren't looking great. State and local tax deduction, also known as SALT deductions allow taxpayers to deduct their state and local taxes when calculating their federal income taxes.
It's a deduction that allows states, most of which run on the blue side, to run high taxes at the state and local level, without bleeding their constituents dry. And while the deduction isn't completely gone as Democrats had feared, the GOP has proposed removing sales and income tax deductions, allowing only property tax deductions with a $10,000 cap per person.
3. Corporations get the tax cut of their dreams, multinational businesses face a new expense.
Corporations will see a 15 percent drop their tax rate down to 20 percent, and it's the most expensive change in the bill. It's still unclear exactly how GOP lawmakers plan to pay for this change, since they've cited cuts to business deductions and credits, which aren't expected to cover the change in-full.
The bill also wants to add a minimum 10 percent income tax on high-earning international subsidiaries of U.S. companies, and require a one-off tax for assets held offshore. This would be a big change for multinational corporations who haven't had to pay income taxes until their profits returned to U.S. soil, where they would be taxed the 35 percent corporate tax rate currently in effect.
4. Standard deduction is set to go up for many taxpayers along with the child tax credit.
The standard deduction is set to increase almost twofold, except for taxpayers with more than one child, who will see a notable decrease in their deduction. On the other hand, the child tax credit is set to go up $600, plus a $300 deduction for guardians, parents, and other non-child dependents.
To pull this off, other deductions are going by the wayside, and limits are set to going into effect for mortgage interest and property tax deductions.
5. Good news for old money
Got it from your mama? You're good to go. The bill plans to repeal the estate tax (aka, the tax on the family jewels) over a six year period, while holding over wealthy inheritors by doubling the amount of tax exempt inheritance from $5.5 million to $11 million in the meantime. This is a pretty significant cut, considering that a single estate valued at $5.5 million or more is currently taxed up to 40 percent upon the holder's death.