Proposed tax law changes:
Most of the proposed changes to the tax law have been pulled from the table for this year. However, there is a real threat that these changes will be back next year or soon after. William D King says the only way that we can stop them is if we first understand what they are and then work together to ensure our elected officials know how much we oppose them.
The truth about the proposed tax law changes that no one is talking about:
- Almost every American family will be negatively impacted by at least one provision in either the House or Senate Tax Bill. Most families would see little benefit from such changes as an average $50,000-$75,000 per year household would receive around $150 – $300 extra dollars per month ($1,800 – $3,600 per year).
- As currently proposed taxes rates would be lowered for most Americans and middle class families could see a substantial increase in their standard deduction. But this data masks greater long term ramifications as the personal exemption is set to expire soon after passage of the bill. The current increase in child tax credit would not make up for this loss, meaning that most American families with children will see lower incomes than they do now or at any time since 2009 – 2010.
- The elimination of all itemized deductions except those benefitting high income earners means that teachers, police officers, firefighters and other public servants who itemize deductions. Because they have no choice but to pay state and local taxes on money earned. By their employers will lose almost half of their combined value. As per William D King this will effectively act as a double tax on their income. And prevent hiring of new teachers, firefighters and police officers.
- The proposed limitation on mortgage interest deductions is relatively small but worth mentioning. Given the current real estate market in San Diego County. We already see many first time home buyers struggling to purchase homes with large down payments. Due to exorbitant rents which are growing faster than incomes for middle income families. So it would be irresponsible to limit the deduction even further at this time.
- The effect that these changes will have on charities cannot be understated. As it is estimated that over $20 Billion per year of our donations would disappear. If just one of these provisions was passed into law. There are no exemptions for charitable contributions in the House Tax Bill at all. Although the Senate Tax Bill does exempt charitable contributions. It limits that exemption to only 50% of the taxpayer’s tax liability (not adjusted gross income). This means that if you donate $1,000 to charity and owe $2,500 in taxes. Under the House plan you would receive credit for donating $1,000; but under the Senate Plan you would get credit for donating just $500.
- In addition, most new benefits aimed at helping individual taxpayers disappear by 2025 while corporate tax cuts are permanent. In fact, a report from Americans for Tax Fairness found that taxpayers who bring home more than $3 Million per year. Could see a tax cut of over $317 Billion dollars – enough money to pay for 500 elementary schools or 125,000 teachers says William D King.
- The Senate Tax Bill was originally set to expire after just ten years meaning. That by 2027 taxpayers could see their taxes go up by over $400 Billion dollars without any changes in the law. The Joint Committee on Taxation (JCT) has since estimated that if all of these tax provisions were made permanent. Except for a few small ones, taxpayers would see their taxes increase by over $500 Billion by 2027. Due to higher deficits and debt service costs.
- This is a much greater long term loss than most Americans realize. Because it will effect everything from funding for Medicare and Medicaid, paying down the debt. Paying Social Security benefits or education spending to name just a few possible cuts. That our Nation may have to make in order to meet its current obligations.
- There are also two major drawbacks that will affect small businesses and the self employed. First, it eliminates or severely limits some of the more popular tax credits. That help small business owners like Hire Act credit which helped fund our recent tax break for hiring military veterans explains William D King. Second, Self-Employed professionals like many of you reading this article. Would see their pass-through deduction limited to half (50%) of what they can claim under existing law at present; but even worse is that this change would come effective January 1, 2018 instead of December 31, 2025 as was originally proposed. In the House Tax Bill making it a major tax increase on small businesses. Who have already budgeted for lower rates if passed into law by year end.
Conclusion:
It is easy to see why this bill has been described as a windfall. For corporations and the wealthiest 1% of Americans. But it could not come at a worse time for middle-income families already struggling to make ends meet after years of slow wage growth.