Although many of us don’t have jobs, and as a result don’t pay taxes, we should still be paying a lot of attention to the new tax bill recently passed by Republican majority House as it will very soon affect us in the nearby future.
It is a central part of the Republican party’s plan to boost the U.S. economy and its main goal is to lower taxes on companies in order to discourage them from moving abroad. Using this logic, Republicans are betting that this will create more jobs, increase economic growth, and raise wages.
The bill not only reduces the corporate tax rate from 35% to 20%, but it’s also a permanent change and companies would get tax breaks to help lower their bills, like the ability to deduct all costs of purchasing new equipment for five years and a special low rate, only a 10% tax rate, on any money they bring back from low-tax countries like Ireland. Many business have been holding cash overseas to avoid the high American tax rate. President Trump and other Republicans would like to bring that cash back to America in order to spur jobs and growth. He also said that the middle class shouldn’t worry too much on the companies large tax cut as once it’s back on U.S. soil, they will use it to build new factories and create more jobs.
However, 65% of the top 300 U.S. companies, according to the Washington Post, said that they would use the money to pay down debts or to purchase their own stock in order to drive up the price of it, making the rich executives and shareholders wealthier by boosting the company stock price. A very different story from what the president had assured us of.
Not to mention that the White House had already tried this before with disastrous results. In 2004, Congress and Bush had dropped the foreign tax rate for about a year and resulted in some extra wealthy CEOs and shareholders, and almost nothing for the workers. In fact, some of the companies had even cut jobs in the following year.
This very fact pokes holes into the reasoning of both the president and the Republicans for the tax cuts, as its shown in the past that it primarily benefits the rich does basically nothing for the workers. The Tax Policy Center even found that half the benefits of the bill go the top one% by 2027.
There’s also the fact the tax cuts won’t be permanent for everyone else and will expire in 2023. At that time, then only 40% of Americans will pay less and 22% will be left paying more, primarily the middle class, $40,000-$75,000, and the upper upper middle class, $200,000-$400,000.
Now here’s the part that will affect a good portion of us in the nearby future. Tax deductions. Almost all itemized deductions, except for three, will be going away. The final House bill keeps the deductions for charitable donations, property taxes, and mortgage interest. Meaning, kiss most of your tax benefits for college goodbye. Currently low and middle income American students can deduct up to $2,500 a year in student loan interest, but that will go away this year. Additionally, graduate students who get tuition waivers for teaching or doing research will have to pay income tax on it. So college will be more expensive than ever and some students will have to end up paying taxes for money they may never even touch.
As much as the president and Republicans try to sugar coat this tax bill, it’s very clear that it mainly benefits the rich, hurts the middle class, and makes college more expensive than ever. There’s even a good chance that it will put the U.S. into deeper debt than it already is, making this a ridiculously shady bill.