Hours before sunrise on Saturday, December, the United States Senate passed the widely unpopular Republican tax bill by a vote of 51-49. The final version of the controversial bill was distributed to senators around 7pm on Friday evening, leaving virtually no time for them to review it and debate before it was brought up for a vote just before 2am.
As expected, the legislation received no support from Democratic senators. The Tax Cuts and Jobs Act, which is driven by the urge to lower taxes on businesses, would permanently lower the tax rate on corporations from 35% to 20%, while also providing rate reductions on individuals which contrary to the corporate tax breaks, would expire after 2025. The new corporate tax rate would go into effect in 2019, putting the U.S. corporate tax rate at a lower level than numerous other nations. Additionally, the bill allows companies to relocate back to the United States any money that they currently have in accounts abroad at a substantially low tax rate of 14.5%. Lastly, the tax system on businesses would shift from a worldwide system in which U.S. businesses are taxed on all income earned globally to a territorial system in which, companies are taxed specifically on their income in the United States.
Although the bill’s main function was to reform the nation’s tax code, it is far from just a tax bill. The bill would usher in devastating changes to the healthcare system, leaving an estimated 13 million Americans without insurance. The signature change to current healthcare law is the repeal of the individual health insurance mandate. Americans would no longer be susceptible to a penalty if they choose not to purchase health insurance. The Congressional Budget Office predicts that as a result, health insurance premiums will increase by an approximately 10 percent each year, resulting in 4 million Americans dropping their health insurance by 2019 and a whopping 13 million by 2027. The elimination if the individual mandate is a precursor for future strategic attacks on the Affordable Care Act in an attempt to eventually repeal the law completely.
We would also see an elimination of the popular and highly utilized State and Local Tax deduction (SALT). As a compromise, taxpayers will still be able to deduct up to $10,000 in property taxes. The state of Maryland, which has the highest percentage of taxpayers that claim the deduction will suffer greatly as result. Under this legislation, the top tax rate for the wealthy would decrease from 39.6 percent to 38.5 percent. The nation’s wealthiest citizens will be allowed to continue deducting their contributions to charity and under this plan, more families will become exempt from paying the estate tax when they transfer property and/or other inheritance. In order to soften the backlash from the elimination of the State and Local Tax deduction, the bill increases the standard deduction and child tax credit however, the personal exemption will be eliminated. Currently, Americans are allowed to deduct $4,050 as a “personal exemption” for themselves, their spouse and each dependent. The standard deduction will be expanded so the first $24,000 in earnings for a married couple and $12,000 for individuals won’t be taxed. The child tax credit will increase from $1,000 to $2,000.
While the legislation helps some Americans, it leaves far more behind. AARP has voiced its displeasure with the proposal, stating that it would raise taxes on over a million seniors by the year 2019 as a consequence of the changes to credits and deductions. This tax bill has been hailed as a gift for the wealthiest Americans and large corporations at the expense of the middle class and low-income families and it truly lives up to this characterization. The legislation undermines a great deal of the progressive strides that were made during the Obama administration. It adversely affects every demographic of our nation, from the youngest citizens to our most senior, further enabling the socioeconomic divisiveness or “classism,” that has been woven into the fabric of our country since its inception.