As tax overhaul took shape, Trump’s goals were reshaped
Some ‘ guidelines’ withered, others weathered process
President Trump has reason to be all smiles once he gets the massive tax overhaul from Congress.
The tax package caps a turbulent year for the president, despite the Republican control of Washington that voters installed in 2016.
Those Republicans banded together on a $ 1.5 trillion dollar tax cut plan that includes a transformation of corporate tax rates and deductions for individual taxpayers.
Alook back at Trump’s first tax announcement in April shows how goalposts for the bill moved as the year went on. Trump released a onepage list of “guidelines” for tax changes in April with great fanfare.
Some of Trump’s central proposalsmade it in the final bill, including a doubling and expansion of the child tax credit; a change in the corporate tax system to focus on domestic income rather than worldwide operations; and a one- time low tax on assets held by U. S. corporations’ foreign subsidiaries. This is intended to encourage companies to bring billions of dollars held overseas back to the USA for new investments.
Other changes Trump soughtwere modified or abandoned during negotiations to secure votes from Congressmembers or to reduce the political fallout from changes.
Jobs
The administration’s top bullet point in April was a demand that the tax overhaul should “grow the economy and create millions of jobs.”
A study of the final bill released Monday by the Tax Foundation, a non- partisan think tank often quoted by Republicans this year, estimated it will create 339,000 additional jobs nationwide over the next 10 years. On a state- by- state basis, the foundation’s estimates range from658 extra jobs in Wyoming to 38,631 in California.
By comparison, the current economy creates about 200,000 jobs a month. The unemployment rate is 4.1%.
Brackets
The original plan called for shrinking the seven brackets to three: 10%, 25% and 35%. The final plan has seven brackets that range from 10% to 37%. Under the increased standard deduction, many people who paid tax at 10% this year would owe no tax next year. After the increased deduction, brackets have been adjusted to allow many people to pay less on the same income. For example, the current law charges a married couple 15% on taxable income ( meaning after deductions are subtracted) of $ 18,650 to $ 75,900. The final bill would charge 12% on taxable income of $ 19,050 to $ 77,400.
Standard deduction
Trump’s plan in April said the standard deduction should be doubled, and this bill comes close to that. The standard deduction for married couples filing jointly this year is $ 12,700, and that would rise to $ 13,000 next year if no changes to tax law were made. The bill would increase the deduction to $ 24,000 next year.
The increased standard deduction means that another Trump principle, protecting “the home ownership and charitable gift deductions,” comes with an asterisk.
The bill would allow people who itemize to continue to deduct gifts to charity, and interest on mortgages less than $ 750,000would remain deductible. But the number of itemizers would drop because of the higher standard deduction.
Middle class
The plan would “provide tax relief to American families — especially middle- income families,” the administration’s guidelines said.
Many middle- income families would benefit in the next few years under the package congressional Republicans produced, but because many tax breaks for individuals would be temporary, some could end up paying more a decade from now, according to an analysis by the Joint Committee on Taxation.