the staff of the Ridgewood blog
Ridgewood NJ, last night Republicans pushed a nearly $1.5 trillion tax bill through the Senate after a burst of eleventh-hour horse trading, giving President Donald Trump one of his top priorities by Christmas.
Peter Ferrara, a senior fellow at the Heartland Institute, writes in The Daily Caller that 2017’s tax overhaul bill will be comparable to landmark tax legislation passed under President John F. Kennedy in the 1960s and President Ronald Reagan in the 1980s. “Presidents Kennedy and Reagan fundamentally fixed the individual, worker side of the tax code,” Ferrara writes. “This year’s tax reform now focuses on the business side, where the real economic problem lies today.” The lessons from the Reagan-era tax debate are particularly instructive today. “The economy took off on a 25 year boom,” Ferrara says. “Despite those dramatic income tax rate cuts, federal revenues doubled while Reagan was president, because of the booming growth.”
Like the House bill, the Senate bill cuts the current 35 percent rate to 20 percent, but the Senate bill calls for a one-year delay in dropping the rate, cutting the USA’s uncompetitive highest corporate taxes in the world and seen as the key to job growth .
For small business a provisions for “pass-through” businesses shaped up to be one of the greater fights among lawmakers in the tax reform debate.
A pass-through business refers to one that is not a corporation, and therefore isn’t taxed as such. These include sole proprietorships, joint ventures, limited liability companies and S corporations. Millions of American businesses use the pass-through taxation format, where the profits are counted in the owners’ personal tax returns.
The Senate measure would set a new deduction of 17.4 percent for those who qualify for the pass-through taxation. It also makes it easier for taxpayers to obtain this deduction. However, it includes a clause that would sunset this deduction
On the other hand, the House plan would reduce the tax from 39.6 percent to 25 percent. At odds here is which plan provides a greater savings for a greater number of pass-through businesses.
The Senate bill would drop the highest personal income tax rate from 39.6 percent to 38.5 percent. The estate tax levied on a few thousand of the nation’s largest inheritances would be narrowed to affect even fewer.
Deductions for state and local income taxes a big issues in high tax New Jersey and particularly Bergen County , moving expenses and other items would vanish, the standard deduction used by most Americans would nearly double to $12,000 for individuals and $24,000 for couples, and the per-child tax credit would grow.
People would be allowed to deduct up to $10,000 in property taxes another killer in high tax Bergen County .
Bergen County Executive Jim Tedesco , “This legislation is bad for Bergen County, bad for New Jersey, and bad for our country. New Jersey residents already far pay more in taxes to the federal government than we receive in federal funding. Rather than attempting to create more fairness for middle class New Jersey families, this bill eliminates the state and local tax deduction, asking us to contribute more to subsidize tax cuts for the very wealthiest Americans and their heirs. Within our state, Bergen County will be among the hardest hit, and families and small businesses throughout our 70 communities will be hurt by this legislation. It would undermine the strength of our regional economy. I strongly urge New Jersey’s Congressional delegation to unanimously oppose this legislation and work with their colleagues to prevent it from being signed into law.”
Tedesco’s plea clearly a sign that state and county tax collection will be hurt .
The bill would abolish the “Obamacare” requirement that most people buy health coverage or face tax penalties a big plus for lower and middle class working people who’s Obamacare premiums make little economic sense .
The House will vote on a motion to go to conference on the tax bills on Monday evening. The Senate is expected to vote on a similar measure soon after. Congress is scheduled to adjourn for its Christmas break on Dec. 15, but House Speaker Paul Ryan has said he will keep the House in session beyond that date if necessary to get tax reform passed.
The changes will not have any impact on your taxes for 2017, which are due to the IRS by April 17, 2018 (you get an extra 48 hours to file because the traditional April 15 due date falls on a Sunday).