The House Republicans finally unveiled their tax plan on Thursday after weeks of internal conflict and negotiations.
During a press conference, House Speaker Paul Ryan said, “This plan is for all those middle-class families who deserve a break. It is for all the families that are living paycheck to paycheck who just keep getting squeezed.”
According to him, under the GOP tax plan, a typical family of four will save $1,182 on their taxes per year. Loopholes for specials interest will be eliminated, and people can “file their tax returns on a piece of paper the size of a postcard.”
On the other hand, House Ways and Means Committee Chairman Kevin Brady said, “This is our chance to deliver the most transformative tax cuts in a generation. Let’s not let the Washington special interest, the TV pundits, or the pessimists fool you. None of them thought we’d get this far with tax reform and they’re wrong.”
Speaker Ryan and Cong. Brady co-sponsored the Tax Cuts and Jobs Act.
Here are the key details of the GOP tax plan:
1. The House legislation reduces the federal income tax brackets from seven to four
• 12% on the first $45,000 of taxable income for individuals; $90,000 for married couples filing jointly
• 25% starts at $45,000 for individuals; $90,000 for married couples)
• 35% starts at $200,000 for individuals; $260,000 for married couples
• 39.6% starts at $500,000 for individuals; $1 million for married couples
During an interview with CNN’s Wolf Blitzer, Cong. Brady made it clear that those individuals and families currently paying 10% on their taxes will pay zero.
2. The standard deduction for singles increased from $6,350 to $12,000. For married couples filing jointly, their standard deduction increased from $12,700 to $24,000.
3. The House bill expands the child tax credit from $1,000 to $1,600 for any child under 17 years old. It adds a $300 credit for each parent and non-child dependent such as older family members. However, that credit will expire after five years.
4. The GOP tax plan removes the option for personal exemption. Currently, taxpayer can claim an exemption of $4,050 for himself/herself, spouse, and each of his/her dependent. The Tax Cuts and Jobs Act will take away that option.
5. It limits the home mortgage interest deduction for existing mortgages and newly purchased homes to $500,000. Currently, taxpayers are allowed to claim interests paid on home mortgages worth $1 million.
6. The GOP tax plan repeals the state and local tax (SALT) deductions. It puts a limit on the deductions to $10,000 a year.
7. The Tax Cuts and Jobs Act preserves retirement savings options such as 401 (k) and individual retirement accounts.
8. The House legislation eliminates the alternative minimum tax (AMT). Taxpayers earning over $130,000 will no longer need to calculate their taxes twice every year and pay the higher amount.
9. It doubles the exemption for death tax from the current $5.6 million per person and $11.2 million per married couple. After six years, the death tax will end.
10. The GOP tax plan reduces the corporate tax rate from 35% to 20%. “Pass through” companies (businesses structured as sole proprietorships, partnerships or LLCs) will pay a tax rate of 25% on 30% of the business income.
11. It limits the corporate interest deductions at 30% of earnings before interest, taxes, depreciation, and amortization. It exempts small businesses and real estate firms from the cap.