The government will remain open until January 19. The House and Senate agreed on another temporary spending bill last night. As a result, Congress will defer action until the new year on a long list of contentious issues including immigration and legislation designed to stabilize insurance markets. The bill includes a short-term extension of the Children’s Health Insurance Program and Veterans Choice Program. The Senate did not pass an $81 billion disaster relief package.
Waiving PAYGO. Congress also agreed to waive rules that would have triggered big domestic spending cuts to finance the GOP's $1.5 trillion tax bill. Under Congress’ pay-as-you-go rules, unfunded tax cuts are supposed to be financed with reductions in spending for mandatory programs such as Medicare. But Congress almost always waives the requirement.
TPC’s new online tax calculator. C’mon, we know you want the answer to one big question about the Tax Cuts and Jobs Act: “What does it mean for me?” A new TPC tax calculator has the answers. You can see how representative taxpayers would do under the new law or create unique examples yourself. If you choose the DIY option, just plug in marital status, age, number and age of kids, amounts and sources of income, and expenses. The calculator will do the rest. But remember, it leaves out many details so doesn’t substitute for a real tax preparer or tax prep software.
TPC’s dynamic analysis of the Tax Cuts and Jobs Act shows little future growth. The legislation, which could be signed by President Trump as soon as today, would boost Gross Domestic Product by 0.8 percent in 2018 but have little effect on long-term economic growth. TPC projects the legislation will increase debt as a share of GDP to 97 percent of GDP in 2027, and to 117 percent of GDP in 2037.
TPC also shows that the TCJA takes millions of people off the federal income tax rolls. In 2018, 4.2 million people will no longer pay federal income taxes. Under current law, 43.4 percent of households will pay no federal income taxes or get net refunds in 2018. Once Trump signs TCJA into law, that share climbs to 45.8 percent.
What limits to the SALT deduction will mean for itemizers. The TCJA limits the state and local tax deduction to $10,000-a-year. New TPC estimates find it will result in 3.5 million itemizers taking the standard deduction in 2018. TPC’s Howard Gleckman notes it will also raise taxes by $36 billion next year, an amount that will rise to more than $90 billion by 2024. Nearly all the tax increases will be paid by the highest-income households, though overall that group will get a substantial tax cut once you take into account the rest of the TCJA.
Sometimes a raise is just a raise. Wells Fargo announced Wednesday that it was “pledging the following actions once tax reform is signed into law,” including raising its minimum hourly wage to $15 from $13.50. But the Los Angeles Times asked a Wells Fargo spokesman yesterday “to confirm that the pay raises were not a result of the tax bill.” The spokesman responded “That is correct.”
In 1993, real estate mogul Donald Trump got a private club, plus another kind of tax break. The Palm Beach Post reports that Trump’s deal with the town of Palm Beach to turn Mar-a-Lago into a private club “hinged on an act of charity crafted to skirt IRS scrutiny and deliver for Trump a seven-figure tax break.” Trump got a deduction for a preservation easement, which allowed him to donate control of the property to a nonprofit, thus reducing its value. The paper reported that the deal made it possible for Trump to deduct $5.75 million from his personal income taxes.
Congress will be in recess next week. The Daily Deduction will post again on Tuesday, December 26. Enjoy a safe and peaceful holiday season.
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