Rejoice! Rejoice! Your tax cut is almost here!
All you taxpayers, your standard deduction is going way up! You will be able to deduct thousands more dollars from your income, tax-free! You’ll save big.
Oh, you’re a single filer? Well, you still save, but not big. Although the standard deduction goes up by $5650, the personal exemption of $4050 disappears. That leaves you an extra $1600 sheltered from income tax. If you are an average earner, with an income of about $31,000, you’ll save about $500. A few more cups of coffee every week. But only for a few years, since the individual rate cuts are temporary.
You’re a married couple? Your standard deduction also nearly doubles from $12,700 to $24,000, but you lose two personal exemptions. Say you’re an average household making $51,000 – your savings could be about $700, nothing to sneeze at. Put it away, because the tax cut expires soon.
Your family has children? That’s much more complicated, of course. Now the loss of personal exemptions really hurts. But there’s another wrinkle: the tax credit for each child goes up from $1000 to $1600 in the House bill and to $2000 in the Senate bill. You have two kids and make $75,000? That higher tax credit really helps, bringing your tax bill down more than $1500. Oops, the higher tax credit is also temporary.
Some other goodies in the Republican plan are really sweet. You’ll still only pay a 20% tax on your carried interest earnings, while your neighbors pay up to 39% on their income. You don’t know what carried interest is? Then you probably don’t own a hedge fund, so it’s better not to think about this tax break for the richest Americans.
But congratulations, you don’t have to worry any more about passing on your hard-earned inheritance to your children. The Senate bill doubles the amount to $11 million that you can pass on and the House bill eliminates the estate tax completely. That’s good – but only if you are even richer than most 1%-ers. If not, rejoice for them!
Stop. Let’s get serious. This tax bill is not for you and me, unless we’re among the lucky 1%-ers who are the real beneficiaries of Republican “tax reform”. Just in the final hours before the Senate vote, even more goodies for the very, very wealthy were shoved into the legislation. Although the top rate for income over $500,000 (know anyone like that?) is 39.6%, a few new categories of income will now get a reduced rate of 29.6%: pass-through entities, investments in mortgages held by real estate investment trusts, and certain income from gas and oil operations. That means about $114 billion less revenue. The White House will be rejoicing: much of Trump family income will benefit from these new loopholes.
Have you been hiding billions in off-shore accounts? If so, you can now bring those profits home for less than 15% tax, even lower than the new 20% corporate tax. Good news for those tax cheaters.
But not for you. Those big breaks have to be paid for somehow. Here’s one way: if your employer rewards you a $50 gift card, you’ll have to declare that as income.
There’s not much for us to rejoice about. But wait – if you want smaller government, rejoice, rejoice! Because the new tax bill will cause huge deficits, a law that goes back to the Bush administration mandates automatic cuts in spending in hundreds of government programs. Smaller government, here we come! Isn’t that great?
Unless you want Medicare to pay for some of your health care – the cut is “only” 4%, so just reach more deeply into your pocket for the $25 billion that will be cut. Unless you are a victim of crime – the cut will be $13 billion. Unless you have black lung disease or need Meals on Wheels or care about wildlife restoration, public health, highways, or hundreds of other federal programs, which will all automatically be cut, often to zero, because of this tax bill.
Well, perhaps we just need to postpone our rejoicing. The Republicans say that the best way to help the rest of us is to give billions now to the wealthy and to corporations. They will be so happy that they’ll raise everybody’s wages and create new jobs.
That’s called trickle-down economics. It’s working right now – the economy is booming, big banks are making huge profits, big corporations have trillions of dollars in reserve, and wages are skyrocketing.
Oops, that last part is not true. Average wages have been rising about 2% a year for 7 years, just a bit faster than inflation has eaten those gains up. The rich have been getting a lot richer, corporations have made huge profits, and the middle class has been stuck.
Nothing has been trickling down.
Republicans say this new tax bill will change everything. Trump says about the tax bill, “This is going to cost me a fortune.”
If you believe in Santa Claus, rejoice, rejoice.
What’s next for us? Just take a look at Paul Ryan’s New Year’s resolution – cut Medicare and Social Security.
Published in the Jacksonville Journal-Courier, December 5, 2017