Tax Legislation 2017
Legislating on the national level is a messy business, especially in our current chaotic scene. As citizens and consumers of news, it's easy to become bogged down, not in the nuts and bolts of how legislation will affect us and our families, but in the bombast and scandal that seems so often to be the focus of politicians and the media that cover them. I'll attempt to bring to these pages what seem to me to be the most significant developments in the current tax debate. As I've said before, I'm no substitute for the daily coverage of the major media outlets, but I do hope to capture the most significant highlights. The most recent posts will appear first in the text below.
What about the “tax reform” proposal currently festering in Congress? Here’s a wake-up call from a renowned economist:
“If you’re a billionaire, it’s wonderful. This is a complete giveaway to the richest people in this country at the expense of everybody else. It’s pure and simple. They [Congress] want to cut taxes on the people who own the companies. That’s why the stock market has already gone up. But for everyone else, whether you’re a homeowner and pay property tax, pay state and local income tax, are paying off student loans or whether you will just be one of the average people who ends up paying off the interest on the 1 ½ trillion dollars or more of debt that they’re taking to give to the richest people of the country we all lose. … It’s shocking!
“… We’re about to create the deepest fiscal crisis that this country has ever had—knowingly and why? To give money to the richest gazillionaires. … It’s the biggest theft I’ve ever seen proposed. It may be the biggest heist in history: 1 ½ trillion dollars.”
This, from Jeffrey Sachs, world renowned economist, author and professor, director of the Earth Institute of Columbia University, special advisor to the UN Secretary-General—in other words, no lightweight—speaking on MSNBC’s Morning Joe Nov. 13th.
The major provisions of the tax proposals currently in Congress are as follows:
Individual Tax Brackets
House Version: The current seven tax brackets are reduced to four. The top marginal rate remains at 39.6%.
Senate Version: The number of tax brackets remains at seven.
Both double the standard deduction on individual tax returns.
House: Eliminates state and local tax deduction. Caps deduction for property taxes at $10,000. Limits mortgage-interest deduction to the first $500,000 of principal value.
Senate: Eliminates the state and local tax deduction. Keeps the mortgage-interest deduction if that interest is on the debt incurred to acquire the property. Eliminates interest deduction for debt on a home equity transaction.
House: Doubles the estate tax exemption (currently $5.49 million) and completely repeals the tax in 2024.
Senate: Doubles the current exemption, but does not repeal the tax.
House: Cuts the top corporate tax rate from 35% to 20% in 2018.
Senate: Cuts that rate by the same amount, but not until 2019
House: Caps the deduction for net interest at 30% of earnings before interest, taxes, depreciation, and amortization.
Senate: Caps the deduction at the same rate before only interest and taxes.
pass through and carried interest
These are complex methods involving rates of taxation for unincorporated businesses and sectors of the economy, such as private equity enterprises. I won’t even try to explain them. I don’t understand them myself. If you’re interested, I suggest you google those terms.
Both Senate and House are planning a one-time tax on overseas profits hoards. The House rates (14% for liquid assets and 7% for other assets) are higher than the Senate’s (10% and 5%).