Tax plans decoded
What it could mean for you
President Trump on Saturday suggested a smaller corporate tax reduction than that proposed by Congress — throwing a new wrinkle into congressional Republicans’ tax-bill agenda.
But even before final negotiations on the bill, it looks like a win for many US taxpayers — despite the loss of state and local tax deductions, which will hammer people in New York, New Jersey and other states with high local taxes.
A typical American middleclass family will see a tax cut of about $850, according to data from the Tax Policy Center, which also estimates that the highest earners will end up shouldering more of the overall tax burden than they do today.
“Despite claims of tax cuts for the rich, the Senate bill actually makes the tax code slightly more progressive,” Brian Riedl, a senior fellow at the Manhattan Institute, told The Post. “The middle class saves more money in terms of the percentage of what they were paying in taxes.”
Under the Senate bill, the top 1 percent of earners — who currently account for 27 percent of all federal taxes paid — will get 18 percent of the cuts, Riedl explained.
Meanwhile, the 80 percent of earners in the lowest tax brackets, who contribute 33 percent of the federal government’s revenue, will get 37 percent of the Senate’s planned cuts.
“This is an across-the-board tax cut for the vast majority of families,” Reidl said.
Some of the benefit for average Americans could be boosted by tweaking the legislation’s corporate-earnings tax rate, experts say.
The House and Senate agree now on a 20 percent corporate tax rate. But the rate might end up 22 percent, Trump suggested in offhand comments to reporters. Over 10 years, the 22 percent corporate tax would provide $200 billion more revenue than a 20 percent rate, experts say.
“It could be 22 when it comes out, but it could also be 20. We’ll see what ultimately comes out,” the president said.
Trump campaigned on an even lower 15 percent tax on corporate earnings and at one point was reportedly furious that Congress could not meet his target.
Some Senate Republicans backed a 22 percent rate to free up money for additional income-tax reductions for individuals and families.
Along with slashing the corporate tax rate, the Senate bill would slightly lower the rate paid on income in the highest tax bracket, nearly double the standard deduction taken by about 70 percent of filers, increase the child tax credit and temporarily expand the medical-expense deduction.
Senate Republicans were overjoyed — and relieved — over the bill’s passage early Saturday on a near party-line vote. It was a ma-
jor legislative victory after 10 months of floundering for the GOP majority, which has been unable to come through for Trump on key issues like the repeal of ObamaCare.
While the tax bill polls poorly with voters, Republican leaders are unfazed. “Big bills are rarely popular. You remember how unpopular ObamaCare was when it passed?” Senate Majority Leader Mitch McConnell told reporters.
“These big, comprehensive bills always have a large array of enemies,” McConnell said. “The real test will be, ‘Does this get America growing again?’ ”
McConnell said the tax overhaul will generate so much economic growth that it will more than pay for itself.
“I not only don’t think it will increase the deficit, I think it will be beyond revenue neutral,” he said Saturday. “In other words, I think it will produce more than enough to fill that gap.”
Economists — even those who support the law — are not so confident.
“It would be a miracle if it paid for itself,” said Riedl. “But [economic] growth will pay for at least a third of it.” Senate negotiators tried to follow the House bill to smooth its passage through a conference committee that will put it in its final unified form. But there are some significant differences.
Both houses agreed to limit tax cuts to $1.5 trillion over 10 years, expand the child tax credit and cut corporate taxes by 15 percent.
But the Senate plan repeals ObamaCare’s individual mandate starting in 2019 — one of the fondest hopes of conservative members — while the House bill kept it in place.
The Senate bill would keep the mortgage-interest deduction but end deductions for home equity loans. The House version would cut the mortgage-interest deduction in half and would eliminate it for second homes. repeal, would The Senate the eliminate estate would tax; it limit, completely, the but House not starting in 2024.
At the last minute, senators backed off on plans to repeal the alternative minimum tax, or AMT, a major part of Trump’s promise to simplify the tax code and ease filing burdens. That will be a sticking point with House Republicans who want it eliminated.