On Thursday, the House Republicans of the 115th Congress released the most comprehensive tax reform proposed since President Reagan was in office. The Chairman of the House Ways and Means Committee, Representative Kevin Brady (R-TX), took the reigns of reforming our outdated and complex tax codes with the Tax Cuts and Jobs Act. Speaker of the House Paul Ryan (R-WI) pitched the plan Thursday as a much needed economic aid for the middle class.
The bill is intended to raise up the middle class and bolster economic growth in the United States. This legislation will begin its journey to the desk of President Trump, beginning this week in the House and Ways Committee for initial adjustments. Congressional Republicans seems hopeful that they’ll be able to get the legislation passed and signed before the December recess.
The Republican plan is aimed at a simplification of the tax code with substantial, much needed tax cuts for average Americans. The proposed legislation is as follows:
- Trims the U.S. tax brackets down from 7 to 4
- 12% for the first $45,000 of taxable income for individuals; $90,000 for married couples filing jointly
- 25% begins at $45,000 for individuals; $90,000 for couples
- 35% begins at $200,000 for individuals; $260,000 for couples
- 39.6% begins at $500,000 for individuals; $1 million for couples
- Nearly doubles the standard deduction from $6,350 to $12,000 for unmarried individuals and from $12,700 to $24,000 for married couples filing jointly
- Cuts the corporate tax rate from 35% to 20%
- Repeals state and local tax deductions
- Limits itemized property tax deductions to $10,000
- For homeowners, caps the mortgage deduction at $500,000 (down from $1 million)
- Preserves 401(k)s and IRAs for retirement
- Eliminates the personal exemption ($4,050 for yourself, spouse, and each dependent)
- Expands the child tax credit from $1,000 to $1,600 with an additional $300 for each parent & non-child dependent
- Keeps the current top tax rate for the highest earners at 39.6%
- Raises the minimum to pay on estate taxes from $5.49 million to 11.2 million, keeping the tax rate of 40% with plans to repeal the estate tax entirely by 2024
- Allows 90% of Americans to be able to file their taxes on a postcard
While this overhaul of our current tax code seems to have the support of most Congressional Republicans, the legislative process on display so far this years means that there are no guarantees. With Senate Minority Leader Chuck Schumer (D-NY) claiming he won’t rest until the bill dies, only time will tell if Republicans are actually able to use their majorities in both houses of Congress to promote their agenda in a meaningful and tangible way.
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