Last week Congress passed a $1.5 trillion tax cut and the largest structural overhaul of the tax system since 1986. The Senate passed the tax-overhaul bill, 51-48 Wednesday 20th after it swiftly passed through the House on a 227-203 vote on Tuesday 19th. The measure then headed to President Donald Trump for his signature on Friday 22nd.
The Republican plan offers deep tax cuts for businesses, lower rates for many individuals and a narrower estate tax. Corporate shareholders, business owners, and most households are to see a reduction in taxes in the next couple of years. On the other hand, there will be those who suffer from the cuts, including some households living in regions where state and local taxes are high. Most of the tax cuts will take effect in January. As a result, many workers will see bigger paychecks from reduced tax withholding by the following month.
The tax bill required a fundamental reevaluation of domestic and international taxes. The plan was seven years in the making, a goal of Republican leaders since they took control of the House and a reminder that tax cuts are a great way to unite the Party. The final bill was the product of seven weeks of swift and efficient legislation.
The plan almost doubles the standard deduction, lowers marginal tax rates for individuals, and doubles the child tax credit to $2,000. The bill lowers the alternative minimum tax so 200,000 people will pay it instead of 5.2 million. It doubles the estate-tax exemption to $11.2 million per person, as a result, fewer than 0.2% of estates will pay it. Tax rates for capital gains and dividends remain unaffected.
On the other hand, the bill takes away tax breaks for some individuals. The state and local tax deduction is capped at $10,000, and the personal exemption is eliminated. Incentives for mortgages and charitable contributions will be decreased. According to the U.S. Tax Policy Center, more than 80% of U.S. households will get a tax cut in 2018, and 5% will see their taxes go up.
For Democrats, which opposed the bill from the start, will use its weak rating in polls for talking points in the upcoming 2018 midterm elections. Democrats argued that the combination of temporary individual tax cuts and permanent corporate cuts showed that Republican interests leaned toward businesses, corporations, and self-interest.
In addition to tax cuts, the bill will also:
End the federal penalty for not having health insurance, resulting in millions of people being uninsured.
Open part of the Arctic National Wildlife Refuge to oil drilling.
Govt spending cuts, including Medicare programs