(Michael’s Note: In light of the breaking news of the long-awaited release of the House GOP tax reform legislation, we have pre-empted the usual Friday Weekend Reading with this special “In-Depth Review Of The Proposed Tax Reforms” edition of Weekend Reading! Hope it helps!)
After more than a year of buzz from both House Republicans, and President Trump, and high-level proposals that were scant on crucial details, this week the House GOP finally unveiled the actual draft legislation of its proposed tax reform – kicking off the messy process of Congressional compromises that may still be necessary to actually pass the reforms into law, but providing a first real glimpse at exactly what is on the table.
While the proposals of the “Tax Cuts and Jobs Act” are not quite the sweeping level of “file your tax return on a postcard” that Republicans had proposed early on – as the inevitable push for compromises eliminated the elegant simplicity of the original version – the House GOP proposal nonetheless represents some of the most sweeping tax reform in more than 30 years, with a reduction in tax brackets, the repeal of the AMT, and substantial simplification employee fringe benefits, college tax preferences, and itemized deductions… along with a dramatically increased standard deduction that will make itemizing a moot point for most individuals anyway.
On the other hand, the proposed changes also bring a whole host of crackdowns that will likely trigger complaints for many – but then again, sweeping tax reform virtually always means that everyone has at least some pet deduction or tax credit to lose. Though for many, the negatives will be made up by the expanded standard deduction, an increased $1,600 child tax credit, a new “Family Flexibility Credit” of $300, fewer (and for many, lower) tax brackets, and an opportunity for many types of pass-through business income to be taxed at favorable 25% tax rates (though, alas, not the pass-through income for financial advisors!), as well as a delayed repeal of the estate tax (starting in 2024).
Ultimately, it remains to be seen whether or how much the Tax Cuts and Jobs Act will be altered from here, as the messy process of compromise begins in an effort to garner the necessary votes to pass the legislation. Nonetheless, the fact that so many compromises have been brought already, from the original House GOP framework, suggests that legislators are truly positioning this proposed tax reform legislation as something that can garner enough votes to pass. Which means that while some of the exact details may shift, the current proposal has a real chance of being passed in the coming months, setting a new foundation for the Internal Revenue Code in the coming decade!
source https://www.kitces.com/blog/tax-cuts-and-jobs-act-2018-house-gop-tax-reform-proposal/?utm_source=rss&utm_medium=rss&utm_campaign=tax-cuts-and-jobs-act-2018-house-gop-tax-reform-proposal
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