It’s possible the hastily written Republican tax bill falls apart at the last minute, like all the party’s fumbling attempts to repeal Obamacare.
But I think Republicans will ultimately pass something they call “reform,” even if it ends up being a one-page resolution that says nothing more than we like the idea of cutting taxes.
If that’s all they can ultimately agree on, they’ll pass it, no question — because they’re desperate to show some kind of legislative accomplishment after an entire year fully controlling the White House and both ends of Congress.
While the House and Senate proposals were quite different, though, it looks like many differences are being put aside and they’re arriving at a consensus closer to the Senate version. That’s great news for people like Donald Trump and big businesses, but not so great for everyone else in the long run.
Some of us might see some short-term breaks, but those aren’t even intended to last. And the way it hurts people doesn’t justify the cuts. Here’s who I think gets hurt most…
Companies that stash profits overseas
I don’t have a lot of sympathy, but I point this one out just to make a point: Almost nobody likes this tax bill. It’s literally more unpopular than some past tax hikes, including Clinton’s and George H.W. Bush’s (yes, the “read my lips, no new taxes” hike) in the 90s. And that’s because, for many people and in many ways, it is one —a very sloppy, somewhat arbitrary, try-and-see, devil-may-care tax hike.
Somewhere between a quarter and a third of voters support the plan. For reference, the Reagan tax cut plan in 1981 was supported by more than half of Americans.
Many major U.S. companies currently stash trillions of dollars in other countries, because unlike those other countries, we don’t tax them on that income until they bring it back here, and when we do it’s at a relatively high 35 percent rate.
The Republican plan is expected to lower that rate to 21 percent and tax those overseas profits at 14.5 percent, with eight years to make the payments. Going forward, new profits overseas would be taxed at least 10 percent.
That’s going to be painful up front for those companies up front, as they have to not only bring the cash home but devise the logistics of doing it and paying for it, and making permanent changes to the way they do business. Then again, they might not bring the cash back anyway, and just pay to keep it in a cheaper country such as Ireland or Canada.
But in the long run, the lower corporate rate will probably make them happier. They’re probably the luckiest group on the list, since those cuts are proposed to be permanent.
Homeowners in coastal states
As Republicans try to make their mountain of malformed tax cuts legal, they’re looking for corners they can cut and save money on. One of those is making the tax cuts for individuals expire in 2024, while the ones for individuals are permanent.
Also permanent? The loss of key tax breaks like the state and local tax deduction, and the mortgage interest tax deduction that people in more expensive real estate markets — in other words, more coastal, populous, and liberal states — rely upon. Without those breaks, they could see painful tax hikes instead of mild tax cuts.
Supposedly, the final version of the bill will bring back the mortgage interest tax deduction, but capped. It may do the same with state and local taxes, but these provisions sound wishy washy, poorly defined, and made mainly as last-minute concessions to buy the votes of Republican representatives in those heavily liberal states. We’ll have to wait and see.
Anybody in the midst of major life changes
Republicans want these tax changes — which they’re still making up as you read this — to take effect Jan. 1. Less than two weeks from now.
That’s insane and completely atypical. Major legislation usually takes a while to kick in, and the bigger the change the longer the grace period. People need time to prepare — government is supposed to serve the public, not the elected officials. That’s just not how this Congress operates, though.
So if you’re in the process of selling your home, planning your wedding, making new investments, starting a business, doing basically anything new in life: Hope you’ve got your finances in order and a lot of money tucked away for emergencies. Because Republicans abruptly upheaving American tax policy certainly is an unexpected expense. For instance, Politico brings up a good example for homeowners…
Both the House and Senate, for example, want to require people to own their homes longer before they can sell them without having to pay capital gains on any increase in value. Currently, they must be in their homes for two of the past five years in order to qualify, but lawmakers want to up that to five of the past eight years.
That could make an imminent move end up costing thousands of extra dollars, or possibly delay one.
And the IRS may not have enough time itself to figure out all these changes — there could be substantial delays in tax refunds for people who rely on them.
People who rely on major government programs
The Republican approach here is: Ram this through, pay for it later. They’re legally allowed to add up to $1.5 trillion to the federal deficit over a decade and still pass this law.
But once they get it through, Republican leadership has already begun talking about how to find savings. Guess where that’s going to come from? According to House Speaker Paul Ryan, it’s healthcare and anti-poverty spending. Anybody who relies on Medicare, Medicaid, or Social Security could be in for a rude awakening — although Trump promised not to touch those things in his original campaign announcement.
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Article last modified on December 22, 2017. Published by Debt.com, LLC . Mobile users may also access the AMP Version: 4 Groups Hurt By the Republican Tax Bill - AMP.
Article last modified on December 22, 2017. Published by Debt.com, LLC .