WHAT DOES THE GOP TAX PLAN MEAN FOR EVERY AMERICAN?
● The House Republican tax plan would add $1.3 trillion to the national debt over a
decade, even after accounting for new economic growth from the bill, according to a
nonpartisan study. The National Debt is the result of the federal government borrowing
money to cover years and years of budget deficits.
● Electric vehicle companies are, due to the eliminated electric vehicle credit. Eliminates
the $7500 tax credit for purchasing an electric vehicle which affects Electric vehicle
companies and fossil fuel producers.
● In the case of the Senate plan, a tax cut is created for private jet owners. This positively
affects fossil fuel producers.
● Although there are no changes directly to the charitable tax deduction, other deductions
are changing in order to make people more likely to take the standard deduction instead
of itemizing. Thereby, doing away with incentives for charitable donations to universities,
which many people, particularly students from disadvantaged and underserved
backgrounds, rely on for scholarships and tuition breaks.
● The House version of the tax plan would end the federal tax credit that supports
adoption. And because Indiana’s adoption tax is tied to the federal one, the state boost
would end as well. (NOTE: VP Pence has gotten this removed from the plan.)
● The deduction for alimony payments would be repealed. This could potentially affect
alimony payments as it is does not incentivizes alimony payments.
● The tax bill would do away with flexible spending accounts for dependent care. These
are usually applied to child-care costs or the expenses of dealing with family members
who are “physically or mentally unable to care for themselves.” Current law allows
families to put up to $5,000 into such accounts, pre-tax. This repeal would put $6.5
billion into the pockets of the wealthy over 10 years.
● The tax plan provides a tax break of more than $30,000 per child sent to private school.
This does not incentivize parents to send children to public schools.
● Currently, Americans can save money for their children’s college educations in
tax-advantaged savings plans. The tax plan would allow parents to use up to
$10,000 from those plans on tuition at private K-12 schools.
● The plan would cut tax breaks for teachers who buy supplies for their classrooms.
● The new tax plan would repeal tax credits for student loan interest, essentially acting as
a tax hike on every young person for the next several decades—he amount of time it will
take most people to pay off their loans.
● The tax plan eliminates both the student loan interest deduction and tax-free tuition
reimbursement from employers.
● The House GOP’s plan would turn graduate students’ tuition waivers into taxable
income. This will have the effect of increasing an ordinary American PhD candidate’s tax
burden by nearly 400 percent.
● Private colleges would be affected since the plan says universities with at least 500 full
time students will pay a 1.4% excise tax on annual investment income. Thereby, taxing
the endowments of many universities.
[public school], [education], [teachers]
Homeowners & Communities
● Tax breaks targeted for repeal include a credit for the rehabilitation of historic buildings.
● The plan would, however, preserve a deduction for golf course owners.
● The GOP plan eliminates the New Markets Tax Credit, which encourages businesses to
invest in economically downtrodden areas, but doesn’t affect a very similar tax credit for
investing in so-called “empowerment zones,” which are poor urban and rural areas.
● The Senate version of the tax bill would eliminate the deduction for local property taxes
(the House bill caps it at $10,000), and both the House and Senate bills would
effectively make the mortgage-interest deduction less valuable to many homeowners.
Both provisions could raise the cost of owning a home, making homeownership less
attractive for at least some families —and perhaps depressing property values.
o New York recently established paid family leave, free public college, and, in New
York City, universal prekindergarten. California boasts one of the most generous
safety nets in the country, and is making significant investments in renewable
energy. Sustaining these programs requires (relatively) high state and local
taxes — while the federal government can run deficits, states can’t.
● Both bills would roughly double the standard deduction, which would lead fewer
households to itemize their deductions; households that take the standard deduction
don’t directly benefit from the mortgage-interest deduction, which reduces the value of
owning a home. The House bill would also cap the amount of mortgage debt eligible for
the deduction at $500,000; the Senate bill would leave the cap at its present level of $1
million —while eliminating the deduction altogether for second homes.
o With more demand in the debt market, standard economic theory suggests that
mortgage rates would increase faster than they would have absent a higher
deficit, raising the cost of financing a home.
[state budgets], [local budgets]
● The GOP tax plan doesn’t just encourage American companies to ship jobs overseas —it also increases the incentive to replace workers with robots. Both bills include “Full and
Immediate Expensing” —a provision that allows companies to write off the cost of new
capital investments right away, rather than when they sell those assets. Some
economists expect this change to ramp up investment in new machines —and, thus,
● So-called “right-to-work” laws already hamper unionization in much of the U.S., by
allowing workers in unionized shops to benefit from collective bargaining, without paying
dues —an arrangement that can starve unions of the funds they need to survive. The
House bill would increase the incentive for such “free riding” by ending the deductibility
of union dues.
● The FICA tip credit will once again be calculated based on the current Federal Minimum
Wage rate instead of the $5.15 base amount which was put in the code in 2007. “This is
going to result in a major reduction in the tax credit for full-service restaurants.”’
● The GOP tax plan eliminates two deductions for work-related moving expenses;
economists believe such labor market churn is crucial to a strong labor market.
● Tax breaks targeted for repeal includes a deduction for employer-provided
● There is a provision that would end a tax exemption for certain international airlines that
fly into the United States. Under current law, most countries have reciprocity
agreements so that a foreign airline that briefly enters a domestic country’s airspace and
lands at an airport doesn’t have to pay tax during its time in the country. The idea is to
avoid the messy process of determining how much an airline owes for a brief stop. This
could affect the tourism industry as well as the supply of labor.
● The Senate plan front-loads the benefits for lower- and middle-income groups. It cuts
individual income taxes for all groups and gives lower-income groups various tax
preferences, but those things are temporary, and expire after 2025.
● “Currently, freelancers, small-business owners and others pay taxes at rates of 10% and
then 15% on their profits if their total income puts them below about $125,000 annually.
The GOP would tax these same businesses at 25% on about one-third of their profits
and at 10% to 15% rates on the rest.
[wage earners], [unions], [industry]
● One of the (many) problems with relying on the private sector for pharmaceutical
research and development is that for-profit firms have little incentive to discover cures for
rare diseases, which, by definition, have limited market appeal. Right now, our tax code
compensates for this by providing drug companies with a tax credit that they can spend
on clinical testing for pharmaceuticals that treat rare diseases. The House bill would
eliminate that credit.
● The deductions under American Health Care Act, which allows severely ill, disabled, and
elderly Americans to subtract much of their health-care costs from their taxable income,
would be eliminated.
● The Senate’s tax bill does preserve the medical-expense deduction —but still sacrifices
non-affluent sick people on the altar of supply-side tax cuts by repealing The Affordable
Care Act’s individual mandate.
● The Work Opportunity Tax Credit is set to be repealed under the GOP House plan. The
federal tax credit allows operators to reduce their federal tax liability by up to $9,600 per
each newly hired employee from a target list that includes veterans, felons, food-stamp
users, summer youth employees, disabled people and those on supplemental security
income as well as a few others.
● Other tax breaks targeted for repeal include a credit for small businesses to improve
accessibility for disabled individuals.
[felons], [veterans], [youth]
● According to the Congressional Budget Office, the GOP tax bill will instantly trigger $400
billion in automatic cuts to Medicare in the next ten years, including $25 billion in the first
year after enactment alone. These cuts are the result of a law known as Statutory
PAYGO. That law requires an automatic cut in spending when Congress increases the
deficit. If the tax bill passes the Senate and is signed into law by Donald Trump, nothing
more needs to be done to cut Medicare. If the House and Senate do nothing, the cuts
take effect immediately after the end of the Congressional session and get bigger with
every passing year. A vote for this tax bill is a vote to cut Medicare.
● Despite talk of capping the tax break for 401(k) plans, the proposal doesn’t include
changes to the retirement plans, yet.
Benefiting the 1%
● Given that the GOP plan slashes the corporate tax rate to 20 percent; repeals the
alternative minimum tax; increase the inheritance tax exemption before completely
eliminating it, the plan does directly benefit the 1%.
o Specifically, the plan would double the exemption for inheritance taxes and
eliminate the tax after 6 years.
o Owners of pass-through entities, particularly high-earners like hedge fund
managers and lawyers, as the plan allows business owners to have more income
classified as business income (and taxed at a lower rate), rather than wages.
● The personal exemption changes are temporary, but three things remain permanent:
The individual mandate repeal; a new inflation metric that continues pushing people into
higher tax brackets; and the corporate tax rate remains at 20 percent, down from 35
● The Tax Policy Center’s model assumes that broadly speaking, 80 percent of the
benefits of corporate tax cuts go to shareholders and capital, and 20 percent go to
● According to Journalist David Cay Johnston, a household reporting an income of 36,000
would get tax savings amounting to twenty cents per day. Meanwhile, a household
reporting an income of 12 million would get tax savings amounting to one thousand
dollars per day.