Some highlights. The provisions affecting individuals are estimated to reduce taxes by $929 billion over 10 years, while the provisions affecting businesses are estimated to reduce taxes by $561 billion over 10 years. The individual provisions include the benefits of the plan's lower individual income tax rate on pass-through business income.
To put the breadth of these changes into perspective, the Congressional Budget Office projects the US income tax system (individual and corporate income taxes) to raise, under current law, $25.9 trillion over 10 years — $22.0 trillion through the individual income tax and $3.9 trillion through the corporate income tax. Over the 10-year budget window, the JCT estimates the bill to reduce individual income taxes (including the lower tax rate on certain pass-through income) by 4% and corporate income taxes by 14%.
I think the fundamental questions/issues are:
1. How does a corporate tax cut benefit the country (the labor/workers or the shareholders)? This is not an easy answer but the GOP argues it is the workers who bear the tax burden and thus will benefit from a corporate cut. While i agree we need to be competitive, we are still going to be way higher than Ireland (12.5%) and many other foreign countries.
2. Assuming this tax cut creates new jobs, how do you fill them when the US is basically at full employment right now based on the rate of unemployment? GOP must figure out a way to make immigration work to fill these news jobs.
3. The deficit - this will not get much if any Dem support to get to a super majority, so you should expect the tax cuts to phase out over a 10 year window because the plan will add to the deficit beyond the 10 year budget window as it currently stands. This way the senate can pass as a budget reconciliation measure with 51 votes (not even sure they can get that). No doubt it will get watered down over the coming weeks.
Personally, it won't change my effective rate too much. I have two kids so don't benefit greatly from the personal exemptions. I don't itemize so will get some help from the increased standard deduction. I don't expect a big raise at work based on a corporate tax cut for many reasons. Hopefully our owner will save some cash and have some dry powder for the next recession so that we can be aggressive in acquisitions.
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