When it comes to politics, there are issues that are often confusing for citizens to fully understand. It can be difficult in determining where you stand on issues, whether they are concerning social issues, environmental issues, or what is currently being debated in Congress: the GOP tax bill. But considering that there are 429 pages in the House Bill that was released on November 3rd, and 479 pages in the Senate Bill which was released almost a month later, it is definitely a challenge to try to understand everything that is going on within those documents.
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Currently, the estate tax exemption limit is at $5.5 million. This means that when an individual dies, he can leave up to $5.5 million to his heirs and not have to pay an estate or gift tax to the government. With both of the new GOP tax plans that have been proposed, the exemption limit will be doubled to $11 million, giving individuals more freedom to do as they wish with up to that amount of money after they pass away without having to be taxed on it (in the House bill they will repeal this part in 2024, but the Senate bill will keep it).
Health insurance presently has an individual mandate which requires that everyone have some form of health insurance or else they will have to pay a penalty. The Senate tax plan repeals this mandate from the ACA, allowing individuals to decide whether or not they wish to have health insurance. However, this may affect those who are having trouble affording health care because once people who feel they don’t need health care drop it, then the costs will rise for the others who still continue and need to purchase health insurance, even though they may not be able to afford those higher prices. The House bill does not repeal this mandate, instead it would repeal the deduction of out-of-pocket expenses in excess of 10% of adjusted gross income which currently benefits low-income individuals who have high healthcare costs that are paid out of pocket.
The tax brackets are a big consideration that people are looking into. With the current system, the individual tax brackets are 10%, 15%, 25%, 28%, 33%, 35% and 39.6%. In the Senate bill, they will still maintain seven but instead they will be 10%, 12%, 22%, 24%, 32%, 35%, and 38.5%. The House proposed to change to only four brackets in their bill, which are 12%, 25%, 35% and 39.6%. Both plans aim to lower individual tax rates overall. The New York Times has an article explaining the individual tax brackets with specifics, and also includes information on how it affects families.
As far as education goes, students will no longer be able to take a loan of up to $2,500 from the government without paying interest with the proposed House bill. It also repeals the $250 deduction for classroom expenses, and will treat tuition waivers for graduate students as taxable income. The Senate bill does none of these, instead it will double the deduction for classroom expenses from $250 to $500.
The corporate income tax will be reduced from 35% to 20% in the bill, which will largely benefit corporations in the U.S. The goal here is so that with lower corporate taxes, businesses will be able to make higher investments which they hope will turn into higher productivity and higher wages across the country and boost the economy.
With all of its tax cuts, this plan that is being discussed in Congress is said to be based on “trickle-down economics,” which by definition is that reducing taxes on businesses and the wealthy in society as a means to stimulate business investment in the short term and benefit society at large in the long term. However, Americans are questioning whether this theory will actually become reality, or if it will just end up making the rich richer in the long run.
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An article by Vox explains the trickle-down effect of the tax bill and how it works in society, and another one of their pieces brings up a point about how the ideas behind proposed tax cuts to the wealthy may not actually work out in the real world the way that they do in theory.
As the Senate and the House both move forward in trying to come up with an identical bill that they can both agree on, it is good to keep all these points in mind and try to understand the tax plans as much as possible so that we know how it may affect us in the future.
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