The Republican tax plan is out!
The plan establishes three tax brackets, 12, 25 and 35 percent, and also keeps a top rate of 39.6 percent for the highest-earners, collapsing the total number of brackets from seven.
So…that’s four brackets? No, no: it’s three brackets plus a special top rate. In other words, four brackets? No, you don’t get it! Liberals never get it! What’s wrong with you?
Fine, let’s move on:
After much nail-biting debate, the House will not make any changes to the pretax treatment of 401(k) plans. “Americans will be able to continuing making both traditional, pretax contributions and ‘Roth’ contributions in the way that works best for them,” the talking points say.
But there’s also this:
One of the biggest flash points will be proposed changes to the popular mortgage interest deduction. Under the Republican plan, existing homeowners can keep the deduction, but future purchases will be capped at $500,000.
Fascinating. The House boffins apparently decided that retirement plans were more untouchable than the mortgage interest deduction. The most likely reason is that capping mortgage interest is, like state and local taxes, something that will mostly affect folks in blue urban areas. In Los Angeles, $500,000 for a house is right smack in middle-class territory. Lots of Angelenos will be affected by this. But in Memphis or Indianapolis? Only someone pretty well off buys a house that expensive. There’s also this:
Republicans used at least a few budgetary maneuvers to squeeze the plan inside its constraints. For instance, different inflation measures limit some costs….The proposal repeals an itemized deduction for medical expenses, a crucial provision to households with extraordinary health-care costs. It also repeals the tax credit for adoption and the deduction for student-loan interest.
They’re screwing students? That’s some serious hardball. And repealing the medical deduction is very odd. I can’t quite figure out why they decided to target this. Is it some back door way of damaging Obamacare?
The rest of the plan appears to be pretty much as predicted. The estate tax is eliminated after six years and Republicans have doubled down on their plan to screw residents of blue states, but otherwise it’s mostly what we expected. On the corporate side, the basic rate goes down to 20 percent; the pass-through rate goes down to 25 percent; and capital costs can be expensed immediately instead of depreciated.
However, despite what the Washington Post reported last night, the bill doesn’t appear to expire after eight years. They’re shooting for a permanent change.