Financial Friday: Income tax simplification #taxcuts #taxreform
Posted By RichC on November 3, 2017
On Thursday, the long awaited Republican tax reform plan finally saw the light of day after most political and financial watchers haggled over the unknown details most of this year. 
President Trump has made tax reform and cuts as his centerpiece agenda as essential to growing the economy and stimulating job and wage growth for working Americans.
For years our government through higher than worldwide competitive taxes has driven business offshore and the use of a punitive tax code has hindered economic growth. As I said before, after seeing the anti-business climate over the past decade, there is no way I would have wanted to start a business; it is risky enough without having bureaucrats fighting against you. Besides the oppressive regulations most manufacturing businesses (mine was one), the complicated gamesmanship required to work within the law and file taxes hurt small businesses who were not savvy in their financial planning. Hard worker and risk takers saw their businesses struggle year after year not because they couldn’t do their primary job, but because they struggled to navigate an oppressive local/city, state and federal bureaucracy including taxes and paperwork that was stacked against them. [end rant … sorry about that]
The biggest instant economic boost is going to come from the proposal the lower business taxes from nearly the highest in the world (35%) to a competitive 20% rate. Small business, which often gets income passed through to individuals, also gets a break pegging their tax rate at 25% along with increase ability to deduction more of their capital expenses in the year they are taken (rather than depreciation over a long period of time). All of this should help owners and managers expand their operations and create new jobs … 
and hopefully stimulate wage growth.
One of the much ballyhooed items has to do with US corporations who hold income in cash in their overseas divisions and wouldn’t mind bringing the money back to the US … but high US corporate tax rates have made this too costly. So there is a provision for them to bring their cash back to reinvest and be taxed at a 5% rate. These corporate changes should stimulate the economy and add jobs triggering a boost in wages for working Americans (at least that is the plan). Those in congress proposing this along with the Whitehouse are counting on a reduction in rates to be made up by the growth in US businesses, rising wages and increased employment through new jobs. We are likely to see continued higher corporate profits which are already being helped by both coming out of a recession and optimism that the Republicans will likely be far more welcoming for business – fewer regulations, lower taxes and USA first policies.
On the individual tax side, there will still be a lot of number crunching if you are in the higher income brackets or live in the very highly taxed states. Almost ALL paying taxes in the lower to middle income ranges will definitely see tax savings and simplicity in filing with a doubling of the standard deduction and bigger Family Credit (expanding of the Child Tax credit). The new simplified proposal eliminates many of the long used deductions that lower taxable incomes … none more contentious than SALT (deduction for State And Local Taxes). The new proposal tried to balance offering up to a $10,000 deduction for real estate taxes, but eliminated the state tax deduction which favored high income citizens in state where taxes are high – CA, NY, NJ, etc. They just so happen to be Democratically controlled state = duh, supporters of higher taxes. Their only comeback is that their state receive less Federal compared to what their high earners pay to the Federal government. Personally I wouldn’t mind seeing those high taxed states feeling pressured to lower the tax burden on their citizens and/or Washington DC reducing what they "take" and "distribute" to states in order to keep them hostage to the federal governments’ demands.
Graphics from FoxBusiness and a Ways & Means Tax Cuts/Jobs Act Highlights PDF
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