Published: Fri, November 03, 2017
Economy | By Shawn Conner

House GOP's plan for long-promised tax overhaul: What to know

House GOP's plan for long-promised tax overhaul: What to know

With few big corporations based in his district, Byrne said the corporate tax cuts proposed in the GOP bill won't do his constituents much good.

The $1.5 trillion tax cut plan would reduce the corporate tax rate as well as taxes for some middle-class families, but it would make big changes to current tax breaks that are especially important to some NY taxpayers. But they also showed a willingness to jettison major aspects of their plan in order to get a bill through Congress.

The sweeping legislation was described by House Speaker Paul Ryan as a series of tax cuts aimed at helping most Americans.

The Republican tax plan seeks to immediately double the estate tax exemption and repeal the tax in six years. The law now applies only to estates transferred at death worth more than $5.49 million for individuals and $10.98 million for couples.

Irish tax experts said that the latest U.S. proposals were broadly along expected lines but that the detail of whatever emerges will be important for companies here.

The top rate for the gift tax would be reduced to 35%, from the current 40%. But the clock is ticking - Republicans have given themselves a deadline of the end of the year to agree on the details and get a bill on President Trump's desk.

The legislation isn't without controversy.

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New York Republican lawmakers said they sent a proposal to House leaders Wednesday afternoon that would retain full property taxes deductions and partial deductions for state income taxes in the tax overhaul that is scheduled to be unveiled Thursday. Consider this passage from a September New York Times report headlined, "In Battle Over Tax Cuts, It's Republicans vs. Economists".

Congress has not succeeded with comprehensive tax changes since 1986, when Republican Ronald Reagan was in the White House and Democrats controlled the House. Seven out of nine NY legislators, and four out of five New Jersey ones, voted against the last budget.

He's had to balance intense divisions among GOP members, especially with the Freedom Caucus, whose chairman, Mark Meadows, R-N.C., has threatened in recent days to pull support for the bill if the corporate tax rate goes above 20 percent.

But leaders gave those lawmakers at least something to mollify their opposition.

A compromise was struck, so that homeowners will be able to write off property taxes up to $10,000, while other state and local deductions are eliminated.

Flake speaking up this early could spell trouble for the bill, since Republicans can only afford two defections in the Senate before they lose enough votes to effectively kill it.

On paper, the bill condenses the existing seven tax brackets to just four, plus an effective fifth bracket at 0%.

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Finding a way to reduce the bill's huge deficit impact has been important to tax writers, though the bill will still nearly certainly add to the debt.

Trump said at the White House this week that he wanted Congress to pass the tax overhaul by the U.S. Thanksgiving holiday on November 23.

Still, fiscal concerns have constrained the legislation's authors. Senate Republican leaders have said they aim to finish their work on taxes by year-end.

The bill's key benefit for middle-class households, aside from lower income taxes, has been a boost to the so-called standard deduction.

The package will reportedly limit the corporate interest deduction to 70% of interest paid on debt. The bill would increase the deduction's value for a family to $24,000. It would create a new family tax credit, which would increase the amount families could deduct per child from $1,000 to $1,600 and add a $300 credit for each parent and non-child dependent. That's why the Tax Policy Center found that 30% of taxpayers with income from $50,000 to $150,000 would face tax hikes by 2027. While the credit now phases out for incomes above $115,000, the Republican bill would push the threshold to $230,000.

While it's not a widely used tax deduction - roughly 5 percent of tax filers claim it - for the old and sick it can be significant.

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