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In Time, America Will See Tax Reform for What It Is

Germaine Smith Baugh

Germaine Smith Baugh

In Time, America Will See Tax Reform for What It Is

By Germaine Smith Baugh

There’s a lot we still don’t know about the Republican tax bill that President Donald Trump signed into law. New IRS regulations must be enacted, and tax accountants are scrambling to see how their clients can best profit from the pending revisions to the federal tax code.

What is clear though is that the bulk of the benefits will go to the wealthy. We already know ordinary Americans won’t gain much. In fact, they’re the ones who ultimately will be forced to pay higher taxes, so the wealthy can enjoy even bigger reductions on their tax bills.

The National Urban League opposes this sham of “reform” bill and any other legislation that seeks to fatten the pockets of the very rich, while leaving vulnerable Americans – children, the elderly and minorities – to suffer. True tax reform makes everyone pay their fair share.

Think of it as Robin Hood in reverse.

President Donald Trump and congressional Republicans promised “a Christmas gift” to the middle class. Instead, the Tax Cuts and Jobs Act that Trump signed into law amounts to the proverbial lump of coal.

If you make under $75,000 a year, the new benefits aren’t as great as the hype. While the standard deduction is doubled, many personal exemptions have been eliminated. The law provides slightly lower tax rates for individual and married taxpayers. Those rates expire in 10 years, and the law eliminates provisions that help married couples.

According to an analysis by KPMG Conference Agreement for HR 1 – Initial Observations report, “… since the calculation of taxable income will also change, not all taxpayers will experience a lower tax burden.”

Unlike the new and very ample tax breaks, the tax reductions for individuals aren’t permanent. Once they expire, the federal tax bills of many individuals who thought they would receive a break will go up.

The so-called increased standard deduction and the bump in the child-tax credit may not go that far either, particularly for married couples.

According to the KMPG report, “Absent the possible mitigating impact of the increased standard deduction and the increased child and dependent tax credits, the [tax bill] would eliminate much of the tax benefit that exists under the current law for a taxpayer filing as head of household versus filing as single.”

It’s a mixed bag for small businesses. While the new “equipment expensing” helps them immediately deduct the cost of new equipment, the tax code revisions caps interest deductions, which many say will make it more difficult for small businesses to borrow money.

Lastly, there’s the Obamacare individual mandate. Republicans have tried to gut the health-care program for years and saw the elimination of the individual mandate as a way to pay for generous tax cuts. So now, tax reform will cost 13 million Americans their health insurance.

Tax reform is nothing more than a massive giveaway to the rich. Trump and congressional Republicans believe it will produce enough of an economic boost to justify the $1.5 trillion cost. The impact on the poor, middle and working class, however, is marginal and, worse, fleeting.

The new law won’t take effect until the 2018 tax year, two months after the November elections in 2018 but well ahead of the next presidential election in 2020. By then, most Americans should have a better idea of tax reform’s true beneficiaries and be upset enough to change it.

 

 

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