The winners and losers in the tax Bill
With the Bill finally headed to a vote this coming week, taxpayers are scrambling to determine whether the legislation renders them winners or losers.
WINNERS
President Trump and his family Numerous industries will benefit from the Republican tax overhaul, but perhaps none as dramatically as the industry where Trump earned his riches: Commercial real estate. Trump, along with his son-in-law Jared Kushner, who is part owner of his own real estate firm, will benefit from lower taxes on so-called “pass through” income, which is money earned by partnerships and other types of businesses whose income is passed through to its owner and taxed at the individual tax rate.
Big corporations Industries like big retailers will benefit from the new corporate rate of 21 per cent, since those firms pay relatively close to the full 35 per cent rate.
Multimillionaires An exemption for estates that owe what Republicans call the “death tax” was lifted to $22 million from $11 million.
Private equity managers During the campaign, Trump railed against wealthy investment managers who, thanks to the so-called carried interest loophole, pay taxes on the majority of their pay at a lower capital gains rates. But the purported reform to this provision will affect few if any private equity managers, leaving the loophole intact.
Private schools and the people who can afford them Parents would be eligible to use a type of tax-preferred savings plan — known as a 529 plan — to save for their children’s elementary and secondary education. Right now, those savings plans are only eligible for college. But they would be expanded to allow for up to $10,000 a year for tuition at private and religious schools.
LOSERS
People buying health insurance With the repeal of the individual mandate, some people who currently buy health insurance because they are required by law to do so are expected to go without coverage.
Individual taxpayers in the future To stay under the $1.5-trillion limit for new deficits lawmakers set for themselves, they opted to make the cuts for individuals and families temporary, expiring at the end of 2025 — even as the corporate tax cuts will be permanent.
The elderly A 2010 law requires that any legislation that adds to the federal deficit be paid for by spending cuts, increases in revenue or other offsets. Some cuts would be automatic, and the biggest program to be affected is Medicare, the health insurance programme for the elderly and disabled. Dozens of other programs are likely to be cut as well, but Medicare, which would face a 4 per cent cut, is by far the biggest.
Low-income families Those who claim the earned-income tax credit will lose out on at least $19 billion over the coming decade under the bill because of the change in the way inflation is calculated.
Owners of high-end homes Under current law, the interest on mortgages for first and second homes is deductible for the first $1 million of the loan. The overhaul would cut that to the first $750,000 and eliminate the owner’s ability in the current law to deduct the interest on a home-equity loan up to $100,000.
People in high property tax, high income states Homeowners in high-tax states like New York, New Jersey and California could be big losers, particularly if they have high property taxes. Their ability to deduct their local property taxes and state and local income taxes from their federal tax bills is now capped at $10,000.
Puerto Rico Puerto Rico had sought an exemption from new taxes, citing the frail state of its economy nearly three months after Hurricane Maria. But no such luck. The tax Bill treats affiliates of American companies on the island as if Puerto Rico were a foreign country and imposes a 12.5 percent tax on intellectual property.
The internal revenue service The tax collection agency has been underfunded and understaffed for years. Now, it will have a raft of new tax rules to deal with that will require upgrading its software, printing new manuals and explaining to confused taxpayers how things work. All this is expected to take place while the commission is working under the supervision of an interim commissioner who is expected to be replaced sometime next year.