By Miriam Raftery
December 22, 2017 (Washington D.C.) – President Donald Trump has signed into law a final version of a sweeping ta reform bill. The measure provides huge, permanent tax cuts for corporations and wealthy individuals, also providing temporary tax relief for many other individuals that will take effect in 2019 and expire eight years later. Many of those cuts will be offset, however, by loss of popular tax deductions and a provision that is expected to raise rates for Affordable Care Act healthcare policies.
Among San Diego’s representatives, only Republican Duncan Hunter voted in favor. Republican Darrell Issa joined with Democrats Susan Davis, Scott Peters, and Juan Vargas to vote against, as did California’s two Senators, Kamala Harris and Dianne Feinstein.
Here's a summary of what’s in the final bill, including key last-minute changes:
- The corporate tax rate drops from 35 to 21 percent.
- The tax rate on the wealthy (those earning over $500,000 a year or $600,000 for couples) drops from 39.6 to 37 percent.
- About 75 percent of taxpayers are expected to see some decrease in taxes at least temporarily. The New York Times has a tax cut calculator here.
- The bill raises the deficit by $1.3 trillion, and no plan for reducing that deficit was included. Republicans say the bill will stimulate the economy and create jobs, but Democrats fear Republicans may seek to gut Social Security and Medicare payments to pay for the tax cuts. Slashing revenues deeply also raises concerns over how to fund key programs in the future, from infrastructure repairs to the military.
- The bill doubles the standard deduction to $12,000 for individuals and $24,000 for married families. More people will be filing under the standard deduction, but doing so means you can deduct items such as charitable contributions and mortgage interest.
- You can no longer deduct state and local taxes over $10,000.
- Deductions for mortgage loans are now capped at $750,000 so you can’t write off mortgage costs above that level.
- The child tax credit rises from $1,000 to $2,000, and more of it is deductible.
- Estate taxes are eliminated on estates up to $22 million.
- The mandate to buy health insurance will disappear in 2019, an action the Congressional Budget Office estimates will result in 13 million people losing healthcare under the Affordable Healthcare Act, since this will lead to raising premiums if younger, healthier people opt out, requiring insurers to cover older, sicker patients at higher cost
- Pass-through companies get a 20 percent tax cut, including S-corporations, LLCs, partnerships and sole proprietorships
- The alternative minimum tax is eliminated for corporations and the threshold for alternative minimum taxes for individuals is raised to a half million dollars for individuals and $1 million for married couples.
- Last-minute changes to the bill by the Senate restored some deductions that the house had previously cut, so student loan deductions, the medical expense deduction and the graduate student tuition waivers remain.
- A provision that would have allowed churches to endorse political candidates was removed in the final version of the bill.