GOP Tax Cuts 2.0: What’s the Deal?

Donald Trump by Gage Skidmore is licensed under CC BY-SA 2.0

President Trump and the GOP are so happy with the passage of the Tax Cuts and Jobs Act (TCJA) they are aiming to implement a second phase as soon as this July, and no later than this December.

According to Trump, who addressed Tax Cuts 2.0 at a February 2018 roundtable in St. Louis: “We’re now going for phase two, we’re actually going for a phase two, which will help, in addition to the middle class, will help companies, and it’s going to be something, I think, very special.”

Chair of the House Ways and Means Committee Kevin Brady confirmed his interest in Tax Cuts 2.0 in a more eloquent March interview on Fox, saying: “It’s early in the process, we’ve had several discussions, and now the Ways and Means Committee members are starting to develop what could be in a phase two…America’s not going to settle until we have everyone back to work with rising paychecks and families keeping more of what they’ve worked so hard to earn.”

Quick aside: if the GOP wanted to give working Americans a pay raise, they could start by raising the minimum wage to $15, a move that would give 4/10 working Americans an immediate pay increase. But, we digress. This is talk for the minimum wage course. Back to taxes.

What’s likely being proposed?

The architects of Tax Cuts 2.0 are keeping it partisan from the outset. To date, there are no Democrats, even relevant committee Democrats, being consulted about the potential legislation. Key allies on the Hill have helped us to figure out what could and is likely to be addressed in Tax Cuts 2.0:

  • Simplification and reform of rates (think more cuts), increased of of the standard deductions, and the elimination of the personal exemption;
  • Deduction for pass-through business income;
  • Expansions of the child tax credit;
  • Cap on SALT deduction and limitation to the mortgage interest deduction;
  • Doubling of the estate and gift tax exemption;
  • Increase in amount of income exempt from the AMT;
  • Full repeal of the ACA mandate.

Did you eyes just glaze over? It’s ok. Take a quick refresher on any of those topics with our lessons to understand the details. But first, let’s look at the bigger picture: what is really at stake here? Who actually wins?

    • Making the individual tax cut provisions permanent would cost an estimated $650 billion over the next 10 years.
      • Guess who has to pay for that? Anyone who relies on Medicare, Medicaid, Social Security. Those are first on the chopping block.
  • With the proposed extension: THE RICH GET EVEN RICHER
    • Even after the extension, households making under $29,000/year in 2026 will face a $50 tax increase.
    • Middle class Americans, those making between $30,000 and $81,000 a year will see a tax cut of about $290 in 2026. Those making at least $690,000 in 2026 will get a tax cut of $30,000. That’s $300 vs. $30,000. Remind us who this tax cut is for again…

What do I say?

  • The GOP promised Americans – all Americans – a tax cut last fall. What they passed was a tax cut for their wealthiest donors instead. Don’t believe them on this second round, their motives have not changed.
  • Some recent polling from allies:
    • 18% say their federal income taxes have down and 56% are not sure whether their taxes have gone up, down, stayed the same, or are unsure. [Gallup, April 2018]
    • 55% say they have not noticed a boost to their paychecks in the last several weeks because of the tax overhaul; 22% have seen an increase. [Morning Consult/Politico, April 2018]
    • Of people familiar with the law, 77% believe it helps large corporations and 73% say it benefits the wealthy, while just 42% say it helps middle-class families. [Associated Press-NORC Center for Public Affairs Research March 2018].

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