By Ashley Loza and Shannon Rapose
Kern Valley Sun
The U.S. Senate passed a new tax bill last week (Tax Cuts and Jobs Act) with a 51-49 vote and is now conferring to resolve differences within the bill before sending it back to the House of Representatives.
This is the latest step in a process that began on November 2 when the bill was introduced to the House.
There was controversy among senators in the early hours of Saturday, December 2, when they were presented with a 500-page amendment to the bill that included handwritten additions in the margins.
Oregon Senator Ron Wyden referred to the amendment as “haphazard work that not a schoolteacher in America would give a passing grade to.”
The bill, as it currently stands, promises to reduce the seven existing tax brackets to four: 12 percent, 25 percent, 35 percent and 39.6 percent. It increases the standard deduction and repeals the deduction for personal exemptions. It establishes a 25 percent maximum rate on the business incomes of individuals.
According to a report by CNBC, the standard deduction would be almost doubled, moving from $12,700 to $24,000 for married couples and $6,350 to $12,000 for single filers, but eliminate the $4,050 that individuals can currently take for themselves and qualifying dependents.
Starting in 2018, the Senate version of the bill offers an increase to the child tax credit and establishes a new family tax credit that would assist with non-child dependents, such as an elderly or disabled relative, and other non-dependent family members. However, be aware that the higher child tax credit will expire after 2025.
Deduction in property tax was also brought back, with a cap of $10,000. The bill will also limit the mortgage interest deduction for debt incurred after November 2, 2017, to mortgages up to $500,000, a cap that now sits at $1 million.
The bill will repeal the deduction for medical expenses, the alternative minimum tax, and will consolidate and repeal several education-related deductions and credits.
For businesses, the tax rate will change from a maximum 35 percent to a flat 20 percent rate. It will allow increased expensing of the costs of certain property, limit the deductibility of net interest expenses to 30 percent of the business’s adjustable taxable income, and modify or repeal various energy-related deductions and credits.
It will also eliminate the Work Opportunity Tax Credit (WOTC) and modify the taxation of foreign income.
According to CNBC, households can expect to save an average of $1,200 in 2019, but the majority of the benefits will go to the highest income earners. Most of the individual provisions of the bill expire in 2025, meaning that most cuts will no longer be seen by 2027.
Opponents of the bill were concerned that it would add $1-2 trillion to the nation’s deficit.
They also argued that the bill would currently eliminate required health care coverage under the Affordable Care Act (ACA), cut Medicaid and restrict deductions on medical expenses and student loans.
In addition, the LA Times reported, the bill would eliminate the deduction for personal losses from wildfires, earthquakes and other natural disasters, which stirred some controversy due to the mass of wildfires burning in the Los Angeles area this month.
Proponents of the bill, however, maintain that it is in the best interest of the country’s middle class.
Wyoming Senator John Barrasso stated that the Republican Party had been able to save taxpayers $122 billion this year by repealing 285 major regulations implemented by the Obama administration and that just this month, 15 major rules were eliminated to save $36 billion over time.
He also stated that the average American would have to pay a $700 penalty if not insured under the ACA mandate this year, and that eliminating this would put a substantial amount of money back in their pockets.
The aim, proponents argued, was to give the average American more money on a per-paycheck basis.
“This legislation was an important promise that Republicans made, and it is a promise that Republicans have kept,” said Barrasso.
The bill stands to undergo changes in the next several days as Congress resolves differences in the House and Senate versions of the bill. Details and updates can be found on https://www.congress.gov/bill/115th-congress/house-bill/1.