Buzz
This week, the Senate is focused on revising a tax bill that could significantly overhaul our current tax framework. While nothing is finalized yet (it’s likely to pass the Senate after Thanksgiving), the latest revisions have introduced some notable adjustments.
One of the most talked-about changes involves the Affordable Care Act’s individual mandate. Under this rule, most Americans are required to pay a penalty if they forgo health insurance, but the new bill seeks to eliminate this mandate. According to the Congressional Budget Office (CBO), which evaluates the financial impact of bills like this, removing the mandate could reduce the federal deficit, though it would also leave 13 million more Americans without insurance by 2027 and raise insurance premiums. You can review their full estimate in detail (PDF).
Other proposed changes include:
Seven tax brackets (10%, 12%, 22%, 24%, 32%, 35%, 38.5%) with slight reductions to individual tax rates, set to expire in 2025. The corporate tax rate reduction (from 35% to 20%) would be permanent.
The child tax credit, originally planned to rise to $1,600, would be further increased to $2,000, but this adjustment would also expire in 2025.
Expanded tax breaks for pass-through businesses, though these would similarly expire in 2025.
The New York Times reports that most taxpayers will see a tax reduction next year due to these changes. However, the bill is also projected to add over $1.4 trillion to the federal deficit over the next decade, according to the CBO. Additionally, the tax reductions for most people would diminish over time as some of the cuts expire.
The Times has provided several charts that illustrate how the proposed changes would impact individuals based on their income. Households earning less than $25,000 would see a $60 reduction in 2018, while middle-income households ($48,600 - $86,100) would benefit from an $840 reduction. The wealthiest households could see a tax break of about $178,000. Unlike other tax brackets, the savings for the highest earners would actually increase over time. While nothing is final yet, you can view how the proposed changes would affect you in these charts.
