The tax bill in Congress passed. It’s been a long road of compromising because of two bills, one from the House and the other from the Senate, that are being merged into one. This is the one that gives corporations a tax break and the middle class (that’s you and me, folks) little more than lip service.
There is good news, though, within this bill. Although, corporations will see their 35% tax rate pushed back to 21%, and “pass-through” businesses will see a tax rate of only 21%, the compromise agreement will also retain the popular deduction for medical expenses and repeal the individual mandate included in the 2010 health care law, among other provisions.
One provision on the chopping block was the Senate proposal to maintain the alternative minimum tax. The alternative minimum tax (AMT) is a supplemental income tax imposed by the United States federal government required in addition to baseline income tax for certain individuals, corporations, estates, and trusts that have exemptions or special circumstances allowing for lower payments of standard income tax. The House-passed tax bill would eliminate the AMT for individuals and corporations. After some last-minute changes, the Senate bill ended up keeping the full corporate AMT and a scaled-back individual AMT in order to pay for other late changes in their plan. Ways and Means Chairman Kevin Brady said House GOP members “feel strongly” about permanently ending the AMT, while conservative and business groups have zeroed in on repealing it as a top priority for everyone.
Republican leaders and tax writers were forced to backtrack from early plans to totally wipe out the deduction for state and local taxes, or SALT, after GOP members from high-tax states like New York and New Jersey revolted. Even California Republicans want to keep the deduction, as it is a more effective tax break for their constituents – namely, us. A compromise was reached to allow up to $10,000 in deductions for property taxes, a provision that was worked into both the House and Senate plans. Although the mortgage interest deduction is limited to debt of up to $750,000. Some of this helps, other parts hinder us.
The bill was stuck in negotiations for quite a while, especially on reducing the number of individual tax brackets. Although the House plan, slashing the number of rates to four: 12 percent, 25 percent, 35 percent and 39.6 percent would have been better, the Senate tax bill, which keeps a more complex rate schedule, with seven brackets beginning at 10 percent and topping out at 37 percent won out after much haggling.
Changes were also included in the final plan aimed at appeasing two Republican holdouts, Sens. Marco Rubio of Florida and Mike Lee of Utah, who were seeking broader refundability for the child tax credit. The bill will allow up to $1,400 of the tax credit to be refundable, according to Rep. Kristi Noem, R-S.D., one of the House conferees. That’s up from $1,100 in the Senate and House bills, which Rubio and Lee said was too low.
The final draft went up for a vote on Tuesday, December 19, 2017 and then on to President Trump’s desk for signing. The Republicans are already celebrating.
“When we get this done, when people see their withholding improving, when they see jobs occurring, when they see bigger paychecks, a fairer tax system, a simpler tax code, that’s what’s going to produce the results,” said Paul Ryan, R-Wis. What bothers me is that the corporate tax cuts are permanent, but the individual tax cuts expire by 2026……