The House Republican Conference released their “Tax Cuts and Jobs Act,” claiming that it’s a “comprehensive plan to reform our nation’s tax system.” NOPE. The largest “cuts” go to corporations and the rich with the dregs being divided up across the masses. The House Republican Conference released their “Tax Cuts and Jobs Act,” claiming that it’s a “comprehensive plan to reform our nation’s tax system.” NOPE. The largest “cuts” go to corporations and the rich. It’s basically more voodoo economics and fairy dust with claims that it will create thousands of jobs and raise wages for the middle class. Sorry, but that’s just hooey! We get nothing and their benefactors get to such America dry while putting another $1.5 Trillion in debt on the books (and that’s the “conservative” estimate, no pun intended).
Rep. Amodei, who claims to represent Rural Nevadans thinks we can all agree that we’d be better off if Congress were to reform our current tax code to benefit the rich and corporations because we’ll all reap the benefits via trickle-down economics (which hasn’t yielded any benefits to the middle class since Reagan introduced that fairy tale decades ago).
The House Ways and Means Committee began its markup of of HR1 on Monday of last week. Amodei tasked his staff with analyzing all 429 pages of this legislation. Basically, they’re playing with “numbers” to conclude that “most” of his constituents won’t be affected (and apparently those that are affected don’t matter anyway). Here’s Amodei’s take:
Individual & Joint Filers
After reviewing the bill through the weekend and all of this week, my staff and I would like to share our initial thoughts with you. As you read through this, please keep in mind some general facts – 75% of Nevadans, filing individually or jointly, take the standard deduction and do not itemize their taxes. So if you’re one of these individuals, if this bill becomes law, your standard deductions have just doubled and your tax rates – in most cases – have gone down.
At the start of this process, the question we set out to answer was: would the majority of Nevadans receive enough tax relief through the new tax brackets and the doubling of the standard deduction to make up for the loss of most itemized deductions? Our initial data indicates that the number of individuals who would take the new, higher standard deduction will increase from 75% of Nevadans to somewhere around 90% of Nevadans.
This increase depends on individuals and joint filers running the numbers of the new proposal against their current itemizations. It appears that the doubling of the standard deduction, coupled with the elimination of three tax brackets to lower most middle-income earner’s tax rates, results in a lower tax bill for individuals and joint filers under the proposed new brackets.
To add more perspective, this means the average family of four in Northern Nevada which earns $64,000 a year, and is also part of the 75% of Nevadans not itemizing their current tax returns, would move from a 15% tax rate to a 12% tax rate. That’s a 20% reduction in tax rates under the new brackets. This lower tax rate, coupled with the doubled standard deduction, means the average family of four in Nevada would take home approximately $1,376 more each year as a result of lowering the federal income tax liability under the proposed plan.
While we are still in the process of reviewing the potential changes to itemized deductions for the 25% of Nevadans who currently itemize their taxes, here is our first analysis based on some of the most common deductions and how those deductions would be affected under the new proposal. In the next update, we will analyze additional deductions that are also common, but here is the first batch. The goal in doubling the standard deduction is to simplify the entire federal income tax process, making it less complicated for joint filing tax payers with an annual income of $0 – $260,000 to use the standard deduction instead of itemizing their taxes. We invite you to do the calculations yourself based on your unique circumstance, but here is what we think the initial impressions are generally with respect to the status of some of the deductions under this new proposal.
If you itemize any of the deductions below, this list will hopefully give you a better idea of how those specific deductions would be affected under this bill:
Home Mortgage Interest – Modified
- For all existing mortgages, if you decide to keep itemizing under this proposal there would be no change for you. If this bill becomes law, the mortgage interest deduction would be capped on new mortgage loans under $500,000.
Charitable Donations – Unchanged
- Under the new proposal, charitable donations will be deducted the same way they are now for those still choosing to itemize.
State Taxes Paid – Deduction Eliminated
- There is not a big impact on federal taxpayers in a state like Nevada with no state income tax.
Property Taxes (local taxes) – Modified
- Under the new proposal, local property taxes will be able to be deducted up to $10,000 for those still choosing to itemize.
Student Loan Deduction – Deduction Eliminated
- Current student debtors can deduct up to $2,500 a year in student loan interest based on their adjusted gross income. Even though the current $2,500 deduction is eliminated under this proposal, the nearly $6,000 increase in the standard deduction entirely offsets this elimination. Although most student debtors don’t even reach the $2,500 cap, those who do will still see this elimination more than offset by the new standard deduction.
If you are one of the 25% of Nevadans who currently itemize your taxes, please click here for a further breakdown and examples of how this will affect you or your family.
Setting the Record Straight:
Finally, you might be hearing certain claims about some of the specific measures included in this bill. I would like to address a few of those below (Note: Here comes the hyper-hypocritical hooey and fair dust).
Most sides appear to agree this bill would add $1.5 trillion to the deficit over the next 10 years as a result of lowering tax rates and increasing standard deductions. First and foremost, the common sense conclusion from this argument is that taxes are going down. So for those asking how the country’s fiscal stability fairs with $1.5 trillion less in revenue over 10 years – the answer revolves around the concept of Gross Domestic Product (GDP). It’s important to note that the deficit argument neglects to consider the long-term benefits tax reform would have on GDP, such as increased wages and new jobs, thereby increasing the eligible tax base and revenues collected for deficit reduction. Even a 1% growth in GDP generates about $3 trillion in revenue over 10 years – more than covering the anticipated $1.5 trillion deficit. This estimate is based on the Congressional Budget Office’s (CBO) analysis of how economic changes might affect baseline budget projections.
You’ve also probably heard this legislation would make college less affordable by eliminating the itemized deduction for student loan interest. Actually, this legislation would put more money back into the pockets of individuals with student loan debt.
Here’s why: Since student loan interest deductions are capped at $2,500 a year, not all debtors reach the cap annually – or even come close. By doubling the standard deduction, student debtors taking the standard deduction would not likely incur any burden by swapping one for the other. In fact – they would most likely see more money in their pockets at the end of the year. Click here to read more about the specifics surrounding this deduction.
This week’s newsletter from Rep. Amodei deals with his conclusions that eliminating the medical tax deduction likely won’t affect that many folks in his district … after all, that increased “standard deduction” will take care of all the ills that plague his constituents. Just break out your postcard and pay less taxes! Right.
Here’s what he had to say:
Medical Tax Deduction (potential elimination)
- Under current law, individuals may only deduct the portion of medical expenses that exceed 10% of their adjusted gross income.
- According to Consumer Reports, of the 30% of Americans currently itemizing their taxes, 19% claim the medical tax deduction – meaning 6% of American taxpayers claim this deduction.
If you’re one of the 6% of Americans who currently claim the medical tax deduction, you would need to compare your current medical expenses against the increased standard deduction under the new proposal ($12,000 for individuals and $24,000 for joint filers) to see how this bill would affect you should it become law.
For example, the average family of four in Northern Nevada has an adjusted gross income of about $64,000. If this family had $7,000 of out-of-pocket medical expenses for the year, they would multiply $64,000 by 0.10 (10%) to find the only medical expenses that could be deducted are those exceeding $6,400, or 10% of their adjusted gross income. This would leave the average family of four in Northern Nevada with a medical expense deduction of $600 ($7,000 – $6,400).
The family in the above example is just one of many families who would fair better under the new tax system due to the increased standard deduction which more than covers their medical expense deductions. The only way it would be a better deal for the average family of four in Northern Nevada to continue claiming this deduction, would be if their annual out-of-pocket medical expenses exceeded $30,400, putting them over the amount that joint filers would be allowed to claim ($24,000) under the new proposal.
Other Facts to Consider
The Affordable Care Act
It’s important to note that most of the information you’re probably seeing fails to take into account the cap on deductibles under the Affordable Care Act (ACA). The 2018 cap for out-of-pocket expenses under the ACA is $7,350 for individuals and $14,700 for families.We must also consider the number of individuals covered by TRICARE, Medicare, or Medicaid who have varying out-of-pocket expenses depending on their plan and income. For Medicaid expansion and traditional Medicaid enrollees, the out-of-pocket expectation is $0. In Nevada, the second largest insurance group includes those on Medicaid. The first largest is those covered by an employer plan which is subject to the maximum out-of-pocket limits.
The American Health Care Act
In May, the House passed HR1628, the American Health Care Act (AHCA), GOP legislation to fix what they perceive to be broken parts of the ACA. While this bill is currently stalled in the Senate, if it were to become law, they claim that out-of-pocket maximums would remain the same as they are under current law. Additionally, they’re hyping a family’s ability to contribute to a Health Savings Account (HSA) on a tax-free basis which they could use to match their out-of-pocket caps as a means to never having to pay taxes on money they use for health care.
Here’s some more of Amodei’s staff’s justifications for telling Amodei to vote “hell yeah” on HR1:
Take the time to go through the bill and decide for yourself if this is “good” or “bad” for you and your family. There are provisions in the bill that will ultimately adversely impact women’s reproductive rights (e.g., the ability to contribute to a tax-free college account for a yet to be born — meaning their next move may be to confer “personhood” upon conception).
(e) Unborn Children Allowed As Account Beneficiaries.—Section 529(e) is amended by adding at the end the following new paragraph:
“(A) IN GENERAL.—Nothing shall prevent an unborn child from being treated as a designated beneficiary or an individual under this section.
“(i) IN GENERAL.—The term ‘unborn child’ means a child in utero.
“(ii) CHILD IN UTERO.—The term ‘child in utero’ means a member of the species homo sapiens, at any stage of development, who is carried in the womb.”.
And, there’s that pesky 1.4% “excise tax” on University investment income (which most likely will cause increases in tuition to make up for those losses. So you’ll not be able to deduct your student loan interest … and you’ll likely have to borrow even more to pay for your tuition.
Pay attention folks … this is gonna get messy