GOP Legislation Aims to Lock in Individuals’ Tax Cuts
A three-bill package unveiled this week by House Republicans seeks to make permanent the individual tax cuts outlined in last year’s policy overhaul.
The package, dubbed “Tax Reform 2.0,” also seeks to lock in the new standard deduction, the special deduction for pass-through businesses, and the larger child tax credit. Those changes are set to expire in 2025.
In terms of retirement savings, the package also seeks to:
- Remove restrictions on MEPs to help small businesses offer better retirement plans
- Eliminate the age cap that prevents Americans older than 70.5 from making deductible contributions to a traditional IRA or Roth IRA
- Allow parents to take up to $7,500 from a retirement plan penalty-free within one year of the birth or adoption of a child
- Permit parents to use up to $10,000 from a 529 college savings account to help their kids with student loan payments
The bill also calls to establish a new type of savings account that could be used for non-retirement purposes. Individuals would be able to contribute up to $2,500 per year in after-tax earnings.
House Speaker Paul Ryan (R-WI) is hoping to vote on the legislation by the end of the moth, but whether there’s significant support for it remains unclear. Trump’s approval rating is down and Americans are less than enthusiastic about the 2017 law.
Last year’s law has become a hot topic among upcoming races for House and Senate, with a majority of Republicans viewing it as successful.
“Under our new system, we’re seeing incredible job growth, bigger paychecks, and a tax code that works on behalf of families and American businesses,” says Rep. Kevin Brady (R-TX), who as Chairman of the House Ways and Means Committee was the principal architect of last year’s tax overhaul. “This legislation is our commitment to the American worker to ensure our tax code remains the most competitive in the world.”
Democrats, on the other hand, see the changes as disproportionately beneficial to wealthy Americans and corporations.
“The first Republican tax law hasn’t helped workers get ahead. Wages aren’t keeping up with inflation, costs for health insurance and prescription drugs and rising, and companies are laying people off and shipping jobs overseas,” argues Democrat Richard Neal (MA). “With this second attempt at major tax legislation, congressional Republicans have doubled down on their initial tax scam and are yet again putting the wealthiest, most privileged Americans ahead of average, hardworking families.”
According to estimates from the CBPP, the GOP proposal would cut taxes by about $32,000 for the wealthiest 1% and by $340 for the bottom 60%. By 2028, the bill will have cost the government $650 billion.
Analysts worry the lost revenue will outweigh any potential economic growth stemming from the cuts and contribute to the deficit.
Author’s Note: Lawmakers know Tax Reform 2.0 won’t survive a Democratic filibuster in the Senate. What the proposal is really intended to do is to draw attention to the 2017 law – and the booming economy – at a time when Republicans are worried about losing their majority in the house.