As a professional in the tax field who has written about this issue for close to 40 years, it is quite amusing to watch self-appointed experts in the press pontificate about the massive proposal for changes to our tax system that was introduced by Republican leaders in the House of Representatives. Let’s take a real look at the proposal.
First, you need to understand most professionals refuse to comment to their clients on the bill because we are so far from the plan being enacted that it could change significantly. People do not want clients badgering them about the seesaw negotiations. Obviously, that means you should not get too invested in what currently exists in the plan.
On the other hand, you can discount some babble from sources trying to cast a negative shadow over the plan. Catherine Rampell, the in-house “supposed” expert at the Washington Post, wrote that “many blue states are in big, big trouble.” They may be, but not necessarily over this tax plan. She goes on to say “The new Republican tax plan is, on the whole, a bunch of tax cuts weighted toward the rich.” Again an attempt to perpetuate a mantra of the Left. Unfortunately, her own newspaper countered by stating that the middle-class would have a tax cut of over $1,100 per family. Rampell doesn’t even see her own inherent contradiction in the two statements where first she says the wealthy in blue states would suffer, but the plan benefits the rich. As I said, quite humorous.
Let’s look at what this plan does. As I have written previously I consider it virtually criminal that the kingpin of freedom and free enterprise, the United States of America, has the highest corporate tax rates in the world. That is before you add in our states’ corporate taxes. This plan fixes that. We live in a competitive world. We live in the supersonic jet age world where we have to be competitive with other countries to attract and keep job producers. Other countries have been eating our lunch by drawing our multi-national companies to their lands and keeping their own companies from coming to America to hire our workers. This will change that. The new rates move us to the middle of the pack among major industrialized nations.
This is huge. It is necessary. It is proper public policy. Anyone who does not support this is a myopic fool. This is the most essential part of the plan and helps all of us.
If nothing else this tax plan kills the Death Tax and the Alternative Minimum Tax (AMT). As I have previously written, the Death Tax is despicable even if the level has been raised to where most people will not have to pay it. There is still extensive planning done by many people below the level where they would have to file an estate tax return. If I never had to speak to an estate planning attorney again on behalf of my clients I would be delighted.
All one will need is a will (you have one; correct?) and maybe a trust if you have a ne’er-do-well child. There is so much money wasted in this area with high paid advisors, the Death Tax makes it just a full-employment act for suits.
I have told people for a long time the only person who understands the AMT is a guy in a very large building in D.C. on the fourth floor in a back office.It is far too complicated and has not done what it was intended to do for years. Good riddance.
The single craziest clause of this proposed law is striking the deduction of alimony as a deduction for the payer and as income for the payee. Why they dealt with this issue I have no idea.It would make sense if someone was paying $5,000 a month in alimony and they could just reduce it to say $3,200 to reflect no longer getting the tax deduction and the recipient not having to declare the income.
The problem is to do that everyone paying alimony would have to go back to court to get those reductions even if the former spouse agreed to the reduction. Then they would have to convince the judge (mediator) who in my experience has nearly zero understanding of economics or taxes (as well as the attorneys). They have their own perverted form of accounting.This clause should be ditched because the system is far too complicated to unwind.
For many who are just employees and maybe own their home, this will make life much easier. Because the standard deduction is doubled to $24,000, for most people filing taxes will be simple if this plan were to pass. They will no longer worry about itemized deductions and keeping track of a bunch of expenditures to potentially get a tax benefit.
Make no mistake for the people who run businesses or make a lot of money: this is not tax simplification. Their financial lives are complicated and thus their taxes will remain complicated.Maybe even more so.
Take a deep breath. We have a long way to go before this becomes law.