Republican Tax Reform Bill Limps Across Starting Line

Republican Tax Reform Bill Limps Across Starting Line

The legislation is a longstanding goal for Capitol Hill Republicans.

Senate Leader John Flanagan on Wednesday singled out a provision in the tax overhaul proposal that would end a popular federal deduction for state and local taxes.

The Republican tax plan repeals an itemized deduction that applies to healthcare expenses.

"We've been working for this on the committee for seven years now", he told MSNBC.

"This plan is for the middle class families in this country who deserve a break", said House Speaker Paul Ryan (R-Wis.). But it came after two days of intense negotiations over differences within the House GOP conference, which led to some decisions that may not stand when the Senate takes up the bill. The bill sets a top pass-through rate of 25 percent - down from as high as 39.6 percent now. But even if they did cut it as low as Trump wants, to 35 percent, the president would not even come close to winning bragging rights. The real estate industry is actively opposing the bill for its new limit on mortgage interest deductions. Howard said 7 million homes are now above $500,000 and in high-cost regions like Washington, D.C., New York City, California and Hawaii, the impact would be felt the most.

In the 19th Congressional District, approximately 32% of tax filers itemize deductions, typically for mortgage interest, charitable donations and state and local taxes.

Ryan said the typical family of four would save $1,182 annually on taxes under the bill.

As Republicans scrambled to assemble a tax overhaul bill, Americans weren't even sure that Congress should be focusing on reshaping the tax system.

"Party leaders are rejecting criticism that their yet-to-be-unveiled tax plan will add to the ballooning federal deficit, saying the tax cuts will essentially pay for themselves by generating robust economic growth", the Times wrote. "Like a Trump University degree, it is phony", said Democratic congressman Lloyd Doggett. Meanwhile, there have been reports of backpaddling on trial-balloons about ending property tax deductions and curbing contributions to 401 (k) plans. Would the increase in the standard deduction proposed in their plan be enough to offset the loss of those deductions for you?

Eliminates personal exemptions: Today you're allowed to claim a $4,050 personal exemption for yourself, your spouse and each of your dependents. Current law contains no such cap on the amount of the mortgage.

The planned repeal of AMT would go a long way toward simplification. And a new family credit of $1,600 would replace the existing child tax credit of $1,000.

Today's plan also allows American businesses to compete in the global economy on a level playing field by reducing the corporate rate from 35% to 20% to bring the U.S. into range of other industrialized nations that our workers are competing against.

"So that redesign for simplicity, fairness, and competitiveness - I predict under this tax reform plan America will vault from 31st in the world among our competitors to the top three as the best places on the planet for that next new job, that next new manufacturing plant, that next new research headquarters - that's what's different", he said. The plan would also help USA corporations to bring profits home from overseas (repatriation) that will lead to more investment and jobs in the United States.

-Hedge funds, doctors and lawyers: Many wealthy Americans hedge fund managers, doctors, lawyers and consultants will get a sizable discount on their taxes. Shares of US homebuilders fell after the bill was released, with luxury homebuilders including Toll Brothers taking the biggest hit.

IBD'S TAKE: The Dow Jones industrial average closed above 23,400 on Wednesday, up more than 1,500 points since IBD changed its market trend indicator on August 22 to "confirmed uptrend" from "uptrend under pressure", the equivalent of a yellow light turning green.

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