House tax bill would cut taxes for corporations, strip deductions for poor and middle class Americans

Inside Subprime: November 22, 2017

By Andrew Tavin

Last Thursday, the House passed a bill designed to overhaul the American tax system, which they’re calling the “Tax Cut and Jobs Act.” The 440 page bill was introduced only a couple weeks ago, on November 2nd, and the rapid vote on such an expansive bill is unusual. The bill passed on nearly strict party lines: no Democrats voted for it, and only 13 Republicans voted against is. Now it’s up to the Senate to hammer out their own version of the bill before entering reconciliation, where the two chambers of Congress will attempt to make their bills into one.

A Washington Post breakdown of the House bill by journalist Heather Long makes clear that the biggest winners from this bill are people who are already doing pretty well, from a financial standpoint.

The bill would cut the top tax rate for large corporations by 15 percent, “the biggest one-time drop in in the big-business tax rate ever,” in Long’s assessment. That’s in addition to multiple other changes that would reduce the tax burdens for large companies. The intent is to spur economic growth, but without some sort of guarantee that businesses will put this money back into wages or other local growth, it’s uncertain at best that this will happen.

The bill also reduces the number of people who would have to pay the estate tax – a tax on inheritances over $5.5 million dollars – and includes language that would lead to the eventual phase out of the estate tax all together. The alternative minimum tax, a tax rich people currently have to pay to make sure they don’t use accounting tricks to lower their tax burden too heavily, would also disappear. Long cites an analysis by the Tax Policy Center that found nearly half the benefits of this bill will go to the top 1 percent over the next decade.

Unfortunately, those further down the ladder might not fare as well. The bill would remove most itemized deductions, including those for things like medical expenses, student loan deductions, and losses from theft. The mortgage interest deduction would remain, but it would be cut in half.

It’s unclear exactly what the Senate bill will end up looking like, but one can assume it’ll likely resemble the House bill in intent, if not quite in scope.    

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