There has never been a time when so much effort and money was spent to stop tax reform than over the last 12 months. In spite of that, the Tax Cuts and Jobs Act bill passed the House 224 to 201 and the Senate 51-48.
And Trump signed the $1.5 trillion package into law last Friday, three days before Christmas.
In spite of intense opposition from Democrats, Republicans overcame party infighting and held ranks to give President Trump what he promised before the election – he oversaw the most comprehensive tax code overhaul in decades.
A Snapshot of the New Tax Law
For Individuals and Families:
- Keeps the seven tax brackets but reduces the rates for five of them.
- New rates start at 10 percent and rise to 12, 22, 24, 32, 35 and 37 percent.
- The highest rate of 37 percent applies to individuals whose income exceeds $500,000. For joint filers, their rate is lowered from 39.6 percent to 37 percent with a threshold of $600,000.
- Keeps the current deductions for student loan interest. In addition, tuition waivers received by graduate students remain tax-free.
- Allows taxpayers to deduct medical expenses that exceed 7.5 percent their adjusted gross income.
- The Affordable Care Act’s individual mandate eliminated beginning in 2019.
- Under the new bill, taxpayers can claim $2,000 credit for each qualifying child under the age of 17. The tax credit applies to single filers and married couples and is fully refundable up to $1,400.
- The estate tax remains at 40 percent but exemption levels doubles. Exemptions are currently $5.49 million for individuals and $10.98 million for married couples.
- Families can deduct up to a total of $10,000 in local property and state and local income taxes.
- New homebuyers have access to a mortgage-interest rate deduction up to $750,000, down from $1 million.
- Corporate tax rate lowered from 35 to 21 percent. Businesses receive a 20 percent deduction for the first $315,000 of joint income.
- For Sole proprietorships, joint ventures, limited liability companies and S corporations a 20 percent deduction is allowed for the first $315,000 of joint income.
No More Mandate!
The intense focus on the largest tax overhaul in 30 years and what that means for average Americans when they get their paycheck has overshadowed what may be an even more significant change.
No one can deny that the end of the Affordable Care Act’s individual mandate will impact ObamaCare and possibly end it all together. Congressional Republicans failed to ‘repeal and replace’ ObamaCare his year but they hope the mandate repeal will effectively force a complete revision of the act and an effective end to ObamaCare.
President Trump said, “When the individual mandate is repealed, ObamaCare is repealed. That’s where they get their money.” After passage of the bill he added, “With this bill, we have essentially repealed ObamaCare. And we’ll come up with something much better. ObamaCare has been repealed in this bill.”
Senator Orrin Hatch (Rep – UT) applauded the move as “the beginning of the end of the ObamaCare era.” He said, “Repealing the individual mandate tax restores liberty to the nation’s health-care system. Once again, the American people will be back in charge of their health care – not Washington bureaucrats.”
Sen. John Cornyn (Rep – TX) said the repeal will make the program “unworkable.”
Senate Majority Leader Mitch McConnell (Rep -KY) wrote in an op-ed for Fox News:
Under ObamaCare, if Americans didn’t buy the kind of health insurance that Washington thought they should buy, they were punished with a tax penalty. But if the plans available under ObamaCare are not affordable or not desirable, the blame lies with the failing law itself.
Though the mainstream media relentlessly attacked the new bill, USA Today admitted:
The Tax Cuts and Jobs Act will simplify the code and make it much easier for millions of Americans to file their taxes. A key component of the plan would nearly double the standard deduction from $6,350 to $12,000 for individuals and from $12,700 to $24,000 for married couples.
Currently, 30% of filers itemize their taxes, which piles up mountains of paperwork. With the higher standard deduction, the number of itemizers will drop to less than 8%, meaning more than 30 million taxpayers will save time that was previously spent organizing receipts and records.
Politics never pleases everyone and neither will any tax bill. At least Congress finally showed it could accomplish something.
~ American Liberty Report