Opinion: First impression of tax-reform bill? It’s a good one

House Ways and Means Committee Chairman Kevin Brady, R-Texas, joined by Speaker of the House Paul Ryan, right, holds a proposed “postcard tax filing form” as they unveil the GOP’s far-reaching tax overhaul on Thursday. (AP Photo / J. Scott Applewhite)

Here are some initial thoughts about the tax-reform bill House GOP leaders unveiled Thursday:

1. It’s immediate and permanent: There are a few exceptions, but for the most part the big changes in this bill take effect immediately and have no expiration date. There’s no phase-in (nor do the changes apply retroactively, i.e. to the 2017 tax year) and there’s no deadline in the future by which Congress must act to extend the changes or watch them vanish. Phasing in tax cuts was a mistake both Ronald Reagan (1981) and George W. Bush (2001) made, as taxpayers simply waited for the full benefit of the changes. If the idea is to stoke economic growth, a slow phase-in isn’t the way to do it. Ditto for the expiration date that came with the Bush tax cuts: If the idea is to affect incentives and behavior at the margins, better to do that with a long horizon, not a short one.

2. It represents a substantial simplification: Not just because the brackets go from seven to four and because the larger standard deduction means fewer Americans will need to itemize. A number of deductions and credits have been removed, meaning there’s less reason to itemize as well.

3. It represents a decrease in marginal tax rates for almost everyone: The pay-off from the removal of so many deductions and credits is a lower rate structure throughout almost all of the brackets; see the tables below (keeping in mind that this appears more complex than it really is, because I wanted to allow for direct comparisons but the income brackets don’t line up exactly from current to new):

Married, filing jointly

Single

As you can see, across most of the income spectrum tax rates are falling or staying the same. The most notable exception is in that initial part of the 12 percent bracket. But here, you have to keep in mind that we’re talking about taxable income — and because the standard deduction is increasing, many if not most taxpayers should see more of their income below the taxable threshold, i.e. in the zero percent bracket.

4. It maintains and enhances some key tax credits for working families: The Earned Income Tax Credit for low-income workers remains in place. The Child Tax Credit grows to $1,600 from the current $1,000, making families whole for the loss of personal exemptions for their children. A new Family Tax Credit of $300 per non-child filer or dependent is created, partially making up for the loss of other personal exemptions (albeit for just five years, a rare change in the bill that isn’t permanent).

5. It’s pro-growth when it comes to businesses: The cut in the corporate tax rate to 20 percent puts the U.S. back in the game when it comes to our competitors around the world. While many companies were able to reduce their tax bills by taking advantage of a series of deductions and credits, many weren’t; the headline rate really does matter to many corporate taxpayers. In any case, it’s been odd to see so many of the same people who are critical of “money in politics” argue that there was no need to cut the corporate tax rate because many companies didn’t pay the headline rate … thanks to loopholes they got through vigorous lobbying. Not to mention that cutting the corporate rate was also an objective of President Obama; he simply disagreed with Republicans about hot to go about it. It’s a win for tax-code simplicity and against special-interest lobbying to create a lower rate for all, not only those companies that can afford to lobby for better tax treatment.

6. It leaves 401(k) investments alone: As I mentioned before, it would have been a big mistake for Congress to limit contributions to these retirement plans, as a matter of policy and politics. They left them alone.

7. It limits, but doesn’t eliminate, the state and local tax deduction: The SALT deduction is one of the biggest in the current tax code, and as I previously explained it amounts to a big incentive for state and local governments to raise taxes. The bill eliminates the deduction for income and sales taxes paid and caps the deduction for property taxes paid at $10,000. That’s a start to getting Washington out of the business of forcing low-tax states to subsidize higher-tax states.

8. It limits the mortgage-interest deduction: Currently, a married couple can deduct the interest paid on a home loan of up to $1 million; the bill lowers that amount to $500,000 (while grandfathering in mortgages that existed as of Thursday). The home-building and real-estate industries are apoplectic, but research has shown countries without mortgage-interest tax deductions such as Australia and Canada have similar home-ownership rates. So it’s questionable whether the government is wise to subsidize home ownership in this way. The bill also limits the deduction to primary residences, and not second homes.

Those are some quick hitters. I’m sure there are other aspects that will merit discussion, but all in all this looks like the kind of bill Republicans have spent years promoting on the campaign trail. They won elections promising to do something along these lines; now they need to find a way to get it across the finish line.

Reader Comments 0

233 comments
bendedknee
bendedknee

Yeah Mr. President, guns had nothing to do with a mentally deranged person mowing down people at a church service. Did the NRA prepare that talking point?

breckenridge
breckenridge

@bendedknee 

It's the new normal in America. And it's only going to get worse, with mass shootings coming more and more quickly, and with more victims per incident.

SGTGrit
SGTGrit

Horrible attack on a church in Texas. Not much is known about the shooter but he must have had a sick hatred for Southern Baptists.

Starik
Starik

@SGTGrit Nobody knows. He might be a Southern Baptist himself.

bendedknee
bendedknee

@JFMcNamara @SGTGrit Yeah go publicize his name and picture so he gets the notoriety  that this nobody wants by committing this crime. Other nobodys lining up to do the same.



breckenridge
breckenridge

November 5 - As he approaches the first anniversary of his election victory over Hillary Clinton, President Donald Trump's approval ratings have hit historic lows.

Oh no.  Not again.

breckenridge
breckenridge

Gee, if only all those people in church would have had guns.


Yeah, that's the answer. Sure it is.

JFMcNamara
JFMcNamara

Its your fault for not doing "Thoughts and Prayers" hard enough after the last one. You better "Thought and Prayer" really hard this time...

bendedknee
bendedknee

@Starik @breckenridge @JFMcNamara Texans need to thank Ted Cruz for his support of  the NRA and "guns every where".Is Georgia next?


Mentally ill can buy and legally carry an Ar-15 in Georgia.

Visual_Cortex
Visual_Cortex

Bold prediction:

Wealth and income disparities will continue to widen.

Just the way our Republican overlords want it.

bu22
bu22

@Visual_Cortex  And the Democrats in the "sanity bubble?"  http://freebeacon.com/columns/class-realignment-broke-democrats/  "...The sanity bubble! What a perfect label for the environs of the self-satisfied and righteous, the elegantly appointed ballrooms where the high and mighty, silhouetted in magenta up-lighting, nod reverentially at clichés mouthed by the latest faddish "thought leader," before tucking into, say, a caprese salad with arugula and pesto, followed by spinach and gorgonzola tortelloni with caramelized pears and bleu cheese cream. Within the sanity bubble life is pleasant, comfortable, and agreeable, its niceties and pleasures and fixed ideas interrupted by only the maelstrom of political and economic change outside...."

Doomy
Doomy

@Visual_Cortex


Income inequality greatly decreased in in at least 4 of the 9 W years in office. It has since enormously expanded under Obama. The reasons for this are beyond the limited understanding of an ideologue such as yourself. 


But lemme ask you something. Were poor and middle class people better off in the 4 years of the W administration when income inequality was rapidly decreasing? 


Secondly, were the poor and middle class better off or worse off during the years of expanding income inequality under Obama?


Think, VC. Think!  

Visual_Cortex
Visual_Cortex

@Doomy @Visual_Cortex

A shared recovery under Obama became impossible with a Republican congress holding the purse strings.

And the gaping inequities will only be made worse by this garbage.

breckenridge
breckenridge

Nov 5 - Former President George H.W. Bush delivered a blunt assessment of Trump in historian Mark Updegrove's new book, titled "The Last Republicans," saying, "He's a blowhard." And former President George W. Bush also had harsh words for his Republican successor: "This guy doesn't know what it means to be president."

Hey boys good call there.

bendedknee
bendedknee

Rocket Man will have a present  shot over the Pacific  when the Dotard visits South Korea. 


Pub Heaven
Pub Heaven

Trump said that he has not yet been to the floating memorial of the Pearl Harbor attack, and that the visit "is going to be very exciting for me."

Because, you know, the roller coaster...

Starik
Starik

@Pub Heaven Hopefully they remember to tell him what the big rusty thing in the water is.

breckenridge
breckenridge

 "Inviting politics into the sanctuary is bad for churches. The proposed House tax plan threatens to destroy our congregations from within over disagreements on partisan campaigns. This change has been pushed by a tiny minority and is opposed by the vast majority of Americans and churchgoers, across party lines and faith traditions.”  Baptist Joint Committee for Religious Liberty, 11-2-2017

Yep. That part has to go.

stogiefogey
stogiefogey

Good article Kyle, definitely accentuates the positive aspects of the tax reform bill.

We need to keep in mind that it still has to pass through the Senate sausage factory where the usual RINO suspects - McCain and the two women - are apt to water it down or even outright vote against it.

breckenridge
breckenridge

@stogiefogey 

Actually the opposition is coming from two budget hawks in the Senate - Bob Corker and Jeff Flake.

breckenridge
breckenridge

I saw a pickup on the road today with an infowars bumper sticker.  Wow, talk about a white trash loser.

breckenridge
breckenridge

By most accounts things are going quite well in America. Job growth continues to be strong, and we are near what is considered full employment. Corporate profits are at record levels. Consumers are spending money. So there is strong tailwind blowing.


Accordingly, this is absolutely not the time to pass any legislation that will be revenue negative. This is an opportunity for republicans in Congress to show whether they really are fiscal conservatives or a bunch of blowhard pretenders. They should reject this tax plan, go back to the drawing board and come up with one that is, at a minimum, revenue neutral.

Doomy
Doomy

Today we learned that Bowe Bergdahl was "a victim" even though this mental disorder that his defense psychiatrist asserted never manifested itself during Bergdahl's time in the army. Then, lo and behold, after the clown deserts we found out years later that he musta been mentally ill according to a defense psychiatrist- even though there were never any signs of this mental illness during his army tour. Progs will believe anything. 

Pub Heaven
Pub Heaven

Have a chance to forward you opinion to the military judge?

Starik
Starik

@Doomy Google "Bergdahl diagnosis." Learn something.

Doomy
Doomy

Dimocrat voters remind me of Halloween trick or treaters. Both show up giddy looking for something free.

JFMcNamara
JFMcNamara

Republikkkan voters remind me of my teenaged daughter. Both are irresponsible and run up credit card debts on things they dont need.

Doomy
Doomy

@JFMcNamara


"Republikkkan"


That's cute. Its even funnier considering that the KKK was founded as the paramilitary arm of the Democrat party. FACT! 


"Both are irresponsible and run up credit card debts on things they dont need"


Thass funny coming from a guy whose prez just ran up nearly 10 trillion in debt. 


Another new found deficit hawk LOL! 

Pub Heaven
Pub Heaven

LThat's cute. Its even funnier considering that the KKK was founded as the paramilitary arm of the Democrat party.”

And all those Southern Democrats turned Republican beginning in the 60’s.

Actual fact.

bendedknee
bendedknee

@JFMcNamara Cons and Kyle want   to give 60% increase to low wage workers in EITC payments from the IRS so they can say they are being fair to low wage workers. 


"The direct cost of the EITC to the U.S. federal government was about $56 billion in 2012. The IRS has estimated that between 21% and 25% of this cost ($11.6 to $13.6 billion) is due to EITC payments that were issued improperly to recipients who did not qualify for the EITC benefit that they received."

Wikipedia

Only Cons would come up with such a wasteful  use of taxpayers money and justify it as part of  a  tax cut package.


Employers could make up the shortfall to below poverty level workers.

Doomy
Doomy

@Pub Heaven


"And all those Southern Democrats turned Republican beginning in the 60’s."


A lie that has been debunked many a time. But if you could show me where George Wallace joined the R party you would have a point. But you can't. So you don't. 

Doomy
Doomy

"(Doesn't matter because Cons really love deficit spending if caused by tax cuts)"- Bended knee


Ahhh. Another reborn Dimocrat deficit hawk. Where was this deficit hawk when we racked up nearly 10 trillion in new debt under Obama? Where were these deficit hawks? Where??? 

JFMcNamara
JFMcNamara

@Doomy Ahhh.  Another reborn Republikkkan deficit spender.  Where was this Keynesian when we had a complete economic collapse under Bush?  Where were these Keynsians? Where???

Doomy
Doomy

@JFMcNamara @Doomy


Bush added about 5 trillion to the national debt. Obama added nearly 10 trillion. Nuff said. 

Pub Heaven
Pub Heaven

“Bush added about 5 trillion to the national debt. “

Unnecessarily...

“Obama added nearly 10 trillion.”

To recover from the Bush Depression.

Dow 600 anyone?

Doomy
Doomy

@Pub Heaven


The recession ended a scant 6 to 8 months into Obama's presidency so your nonsensical answer doesn't make any sense. So what's your excuse for his runaway deficits the next 7 years? 


Oh, thass right. You have none. 

bendedknee
bendedknee

Kyle--- "The Child Tax Credit grows to $1,600 from the current $1,000, making families whole for the loss of personal exemptions for their children"  WTF???


 If you do not earn enough to owe taxes you get paid because your employer is too cheap  to pay a living wage?


How much does that increase the deficit? (Doesn't matter because Cons really love deficit spending if caused by tax cuts)


Corporate welfare from the Cons.


more than 25% of EITC paid out due to fraud. Not a concern for Kyle and the cons.



JohnnyReb
JohnnyReb

@bendedknee

Wage rates are like commodities.

Companies are in business to make a profit, not to be social justice organizations.

The beauty of our country is anyone can be anything.

If a person is not happy with their wages, improve or go elsewhere.

So stop whining about living wages and shout the praises of a country with unlimited opportunity.

bendedknee
bendedknee

@JohnnyReb @bendedknee So you are happy with IRS paying out  50-100 billion a year to low income workers using your money because their employer does not pay them enough to bring them above the poverty level.

Cons are just ignorant socialists giving away billions to cover corporate greed.

Doomy
Doomy

@bendedknee


"If you do not earn enough to owe taxes you get paid because your employer is too cheap  to pay a living wage?"


You're not much for basic economics are ya? People are paid according to their job skills and the demand for those skills. They are not paid according to the subjective nature of what 3rd parties like yourself think they should be paid. 

Doomy
Doomy

@bendedknee @JohnnyReb


Still ignorant of basic economics I see. If you mandated that employers pay what you arbitrarily have decided is "a living wage" then those costs simply get passed on to the consumer- you. 


And let's be honest about it. If the Rs eliminated the child tax credit the progs would be screaming that the mean ole Rs hate poor and middle class people. And you would be the first one screaming it. 

JFMcNamara
JFMcNamara

@JohnnyReb @bendedknee "The beauty of our country is anyone can be anything."


Oh boy.  I didn't even read much of the rest of that, but this is a doozy.  If you aren't born with a high IQ, you cant be anything.  You honestly think those factory workers being laid off will instantly become lawyers, engineers or computer programmers.  You think they simply lack the willpower?   The can't do those jobs because they aren't smart enough.


Only 20% of the population is smart enough to go to college and excel.  80% of the population is limited because they didn't hit the genetic lottery.

Doomy
Doomy

@JFMcNamara @JohnnyReb @bendedknee


Well, if they aren't smart enough then they'll just have to settle for those lower level jobs and be happy that they still can earn enough to enjoy a decent living. No one owes them anything. 


I figure if folks from Mexico who can't even read or write English, let alone read or write in their own language, can come over here and earn enough to not only support themselves but support family members back home then I have to ask the question- Why can't native born Americans do the same? 


For some reason immigrant bootstraps seem to work just fine but native born bootstraps don't work as well. 

Doomy
Doomy

@JFMcNamara


"Folks are poor and have jobs. They are taking low paying jobs with no benefits to make ends meet."


If they are so poor then why does the average poor American have more square footage of living space and more material goods then the average middle class Frenchman or German according to the Census Bureau. 


Angry and sad? LOL! I'm not the one whose party has lost 1000 seats between statehouses and federal seats the past decade. LOL!

BuckeyeGa
BuckeyeGa

@Doomy @JFMcNamara You're trying to deflect to the living space of France or German..That's not even apples and oranges..that's more like apples and pecans.. lololol

JFMcNamara
JFMcNamara

@Doomy @JFMcNamara I was talking about you personally.  No one else here name calls or makes personal attacks like you do anymore.  Those folks are banned or have stopped.



Every post is mostly on topic and makes an explicit point pertaining to the source material.  You just make troll posts and long, rambling, unsubstantiated, easily proven false rants of nonsense interspersed with personal attacks.  When asked to support it, its no more than your opinion or something you read on Breitbart.  


You seem kinda sad and angry.

JFMcNamara
JFMcNamara

Um. They do. Our unemployment rate is 4%. Folks are poor and have jobs. They are taking low paying jobs with no benefits to make ends meet.

I thought that was what Trump voters were trying to change. Do you have a goal, or are you just angry and sad?

bendedknee
bendedknee

@Doomy @bendedknee @JohnnyReb Just eliminate payroll tax of employee and have employer pay it for low wage workers. Billions in fraudulent payments would be saved. Or is that asking too much of employers?