What Does The Tax Cuts and Jobs Act Actually Call For?
WASHINGTON - The GOP has released their new tax reform policy on Friday. For individuals and families, the act would lower “individual tax rates for low- and middle-class income Americans to Zero, 12%, 25%, and 35%”. This means the GOP would cut the current seven brackets to five, and keeps the high income bracket at the same 39.6%. The second to lowest bracket will actually see their taxes increase.
The new plan also eliminates the alternative minimum wage which is currently paid by many upper-middle income taxpayers. This could simplify the filing process for millions. Although only 5% of taxpayers actually pay the alternative income tax, many more have to calculate whether or not they owe it every year. Although the new reform basically doubles the standard deduction, the limits on dedications and itemized deductions when it comes to state and local taxes hits the middle class extremely hard.
Although some items are extremely specific, others such as “streamlines higher education of benefits to help families save for and better afford college tuition and other education expenses” are left extremely vague. This either means the GOP hasn't reached an agreement or its something they have decided to not talk about.
Nancy Pelosi is very against the new plan for tax reform, in an interview with CNN, she says the GOP is trying to pass the bill “with the speed of light, in the dark of night”. This is why the bill would be unsustainable. When asked if the plan could benefit middle class Americans, Pelosi said “no, no they won’t...They (the GOP) give with one hand and take with the other”. This plan would make the national debt of 1.5 trillion dollars explode, in large part because of the trillion dollar cut to corporations and the enormous cuts to Medicaid and Medicare. It is now easier for corporations to hire work from overseas which goes against President Trump's America First stance. “This is really a gift to corporate America” Pelosi states, “and then saying these people will pass it on to the workers, they never have”.
The Joint Committee on Taxation released its analysis of the GOP plan on Friday. Within the first few years, there are real cuts to all tax brackets but starting in 2023, there would be a tax increase for many lower income and upper middle class taxpayers. Because the plan is heavily weighted toward corporate cuts over individual cuts, as the inflation indexing kicks in and the $300 family credit expires, the national debt will go through the roof.
The meeting with Gary Cohn, Trump’s top economic adviser, and Marc Short, Trump’s director of legislative affairs, is a signal that the Trump administration believes they may need Democrats to pass Trump’s top legislative agenda. Because the healthcare bill proposed by the GOP failed earlier this year, Republicans in Washington are trying to work with Democrats to pass this bill. This also ensures the Democrats cannot say “the administration didn't include them in the process once it comes time to vote for tax cuts”.
In states where Trump won handily, there's pressure for moderate Democrats in the Senate to cave to the bill. Many who are up for reelection such as Manchin, Sen. Heidi Heitkamp of North Dakota and Sen. Joe Donnelly of Indiana are forced to back Trump’s tax plan. And this pressure only increased at Tuesday's meeting.
