The House Republican tax cut bill is finally here but, contrary to Trump's wishes, it is not called the "Cut Cut Cut Act."
The new bill, called the "Tax Cuts and Jobs Act," lowers the corporate tax rate from 35 to 20 percent as we expected and pays for some of it by eliminating deductions that will hit a significant portion of the country.
Among other things, their bill would eliminate state and local deductions for income and sales taxes and even eliminate deductions for student loans.
From the Wall Street Journal:
The proposal repeals an itemized deduction for medical expenses, a crucial provision to households with extraordinary health-care costs. It also repeals the tax credit for adoption and the deduction for student-loan interest.
The bill also limits the home mortgage-interest deduction. For new home purchases, interest would be deductible only on loans up to $500,000, down from $1 million today; existing loans would be grandfathered.
Because of the larger standard deduction, fewer people would have a tax incentive to make charitable donations. Many charity groups had pushed for a more widely available deduction, but Republicans decided not to expand the charitable deduction to people who don’t itemize their deductions.
There are other giveaways for corporations and the rich included in the bill aside from lowering the marginal rate from 35 to 20 percent.
The new rules intended to prevent rich people from classifying themselves as businesses to qualify for lower rates appear to be flimsy enough to navigate with a competent accountant. The bill would also eliminate taxes on foreign income.
The GOP bill would also phase out the estate tax by doubling the current threshold of $5.6 and $11.2 million for individuals and couples respectively before eliminating it entirely in 2024.
At the end of the day, Republicans say their bill will only raise the deficit by $1.5 trillion. That's a lot of money, but it's also incorrect. Their bill assumes growth will trickle down from corporations to employees and then directly into the Treasury's coffers. Things have never worked out that way before and there's no reason to think they will now. The final cost will be far higher $1.5 trillion.
Now, several influential groups have already come out against the House tax bill including the National Home Builders and National Realtors associations as well as the National Federation of Independent Businesses (NFIB).
In each case, these groups say the bill is stacked too heavily in favor of mega-corporations. The Home Builders Association went as far as to say the bill could cause a "housing recession."
"The details that are coming out show that the House Republicans are picking large corporations and wealthy Americans over small businesses and middle-class American homeowners," Jerry Howard, the NAHB's CEO, told Business Insider.
Howard estimated that 7 million homes would be excluded from the mortgage-interest deduction, amounting to about a third of the homes in California.
"You're talking about potentially causing housing recessions in some of the biggest markets in the country, and those kinds of recessions tend to have spillovers," Howard said. "We're worried about a national housing recession."
If we're talking about winners or losers in this bill, the winners have to be large corporations and wealthy individuals who can afford the lawyers and accountants necessary to take advantage of the all-new loopholes included in the bill.