The Ways and Means Committee, a tax writing committee from the Republican majority House of Representatives, released on Thursday new proposed tax legislation called “Tax Cuts and Jobs Act” that aims to overhaul America’s tax code for the first time in 31 years and is reported to deliver more jobs, fairer taxes, and bigger paychecks.
The tax reform legislation includes a simplification of U.S. tax brackets and a doubling of the standard deduction from $6,350 to $12,000 for individuals and $12,700 to $24,000 for married couples.
A typical middle-income family of four, earning $59,000 (the median household income), will receive a $ 1, 182 tax cut under the proposed legislation.
The proposed tax rates consist of new tax rates of 0, 12, 25, and 35 percent while maintaining a 39.6 percent tax bracket for high-income Americans.
“Our legislation is focused entirely on growing our economy, bringing jobs back to our local communities, increasing paychecks for our workers, and making sure Americans are able to keep more of the money they earn” said House Ways and Means Committee Chairman Kevin Brady (R-TX).
Some of the key changes under the House legislation includes repealing the alternative minimum tax, and lowering the thresholds of state and local property taxes which is capped to $ 10,000.
Home mortgage interest deductions are lowered for newly purchased homes up to $500,000 instead of $ 1 million under current law.
Interest would only be deductible on a taxpayer’s principle residence.
The National Association of Realtors came out on Thursday opposing the proposed tax reform changes and claimed that it would represent a tax hike on middle class homeowners.
The National Association of Realtors explained in a released statement that the proposed tax legislation installs a new cap on property taxes, and adds new restrictions on the capital gains exemptions homeowners utilize when they sell their home which they maintain is vital for allowing homeowners to use their equity to pay for retirement and other long term needs.
“The nation’s 1.3 million Realtors® cannot support a bill that takes homeownership off the table for millions of middle-class families,” said NAR President William Brown.
“We know this legislation is just the beginning of a much longer discussion. Our members will continue to make their voices heard as we push towards tax reform that responsibly lowers rate while protecting the dream of homeownership” Brown added.
Brown said that America’s homeownership rate is hovering around a 50 year low today and expressed concerns about lowering tax deduction incentives for homeowners under the proposed legislation.
“By eliminating or nullifying the incentive for homeownership, however, Realtors® are concerned that homeownership’s wealth-building potential could be pushed out of reach” Brown said.
Housing related stocks took a sharp nosedive on Thursday after the proposed House tax reform legislation was unveiled, featuring a reduction in the mortgage interest deduction.
Toll Brother Inc. declined – 6.09 percent on Thursday.
Lowering Small Business and Corporate Tax Rates
Under the proposed legislation, the corporate tax is lowered from 35 percent to 20 percent beginning in 2018. If approved, it would mark the largest historical reduction in the U.S. corporate tax rate.
Small businesses would have a tax rate of no more than 25 percent on pass through business income, the lowest tax rate on small businesses since World War II.
Among the other proposals, the legislation revises the so called “death tax” by doubling the exemption, and completely repealing the death tax after 6 years.
The earned income tax credit and the child and dependent care tax credit are preserved under the legislation as is the deduction for charitable contributions.
Interest on bonds issued to finance the construction of, or capital expenditures, for a professional sports stadium would be subject to federal tax.
The estate tax exemption increases to $10 million, up from $5.49 million and is entirely repealed after 6 years.
Currently, an individual can leave $5.49 million to heirs and pay no federal estate tax.
The proposed House Legislation also makes it easier and less costly for American businesses to return foreign earnings to the U.S.
On November 6th the proposed House tax legislation will be subject to a mark up.
Senator Bernie Sanders of Vermont and Sen. Elizabeth Warren of Massachusetts sat down on Thursday and criticized the latest House proposal on Twitter for giving large tax cuts to multinational corporations and the wealthiest Americans.
“Huge tax cuts for multinational corporations and the top 1%, backed by the Koch brothers.
@Sen Warren and I break down the GOP tax plan” Sanders tweeted on Thursday.
— Bernie Sanders (@SenSanders) November 2, 2017
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