The President Gets Down To Business
By: Josiah Akhtab
The Tax Cuts and Jobs Act was recently been passed by the Senate, 51-49, after first being passed in the House, 227-205.
On December 2, President Trump gave praise to Republican lawmakers on Twitter, as Trump exclaimed, “Biggest Tax Bill and Tax Cuts in history just passed in the Senate. Now these great Republicans will be going for final passage. Thank you to House and Senate for your hard work and commitment!”
The Tax Cuts and Jobs Act marked the first significant legislative victory since the Republicans took control of the Executive branch in 2017, after taking control of the legislative branch back in 2014. The high speed process and determination to overcome and disregard objections accentuates the pressure they have faced in getting the act approved.
The Republicans pitched the bill in favor of the middle class, stating the “overhaul” intended to cut taxes for about 70% of middle class families.
It in turn, rather, would raise them for millions of other families, as the Senate plans to phase out tax breaks for state and local income as well as individuals by 2025.
New York Senator and Minority leader, Chuck Schumer, stated the Republican approach was “a process and a product no one can be proud of and everyone should be ashamed of.”
Senator Schumer also went on to say that the changes that were made “under the cover of darkness” would “stuff even more money into the pockets of the wealthy and the biggest corporations while raising taxes on millions in the middle class.”
Democrats, along with Senator Schumer, opposed the bill, saying it was in favor of the wealthy and not the middle class. However, the bill’s approval was made possible by the Republican idea that $1.5 trillion in tax cuts would sort things out, producing enough economic growth and additional revenue to cancel out costs to the Treasury.
The New York Times reported this belief to be contradicted by several studies, including one from the economic scorekeeper, in which Republicans regarded as “overly pessimistic.”
The Tax Cuts and Jobs Act, according to Congress, serves to “amend the Internal Revenue Code to reduce tax rates and modify policies, credits, and deductions for individuals and businesses.”
The act, for individuals, serves as follows: to replace the seven tax brackets with four brackets of 12, 25, 35, and 39.6%, increase standard deductions, repeal deductions for personal exemptions, establish a 25% tax maximum on business income for individuals, increase child tax credit, and establish a new family tax credit.
It also serves to repeal limitations on certain itemized deductions, repeal deduction for state and local income or sales tax not paid or made in business, and repeal deductions for medical expenses.
It will also consolidate and repeal several education related deductions and credits amongst other things.
From a business perspective, the bill serves to reduce corporate tax rate from 35 to 20%, allow increased price raising of certain properties, and limit deductibility of net interest expenses to 30% of business’s adjusted taxable income.
Businesses also benefit from the elimination of the exclusion for interest on private activity bonds.
The bill also modifies or repeals energy-related deductions and credits, modifies taxation on foreign income and imposes excise tax on certain payments from domestic to foreign related corporations.
The Tax Cuts and Jobs Act was signed by President Trump on December 22nd, with most of the bill, especially the new tax brackets, going into effect on January 1st, 2018.