KUSA - Congress plans to spend the holidays fighting over an issue near and dear to them: money.
Since the House passed its tax reform bill before Thanksgiving, we’ve already seen the battle lines drawn.
VERIFY – YOU’VE GOT QUESTIONS, WE’LL FIND ANSWERS
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A note before we get started: This Verify piece will break down some of the major arguments for and against the bill, fact checking against the House version of the bill.
The Senate will likely pass a bill that’s different and the final bill may be a compromise between the two versions.
You can also check out part 2 of this Verify, which focuses more on the important differences between the House bill and the version that passed a committee vote in the Senate.
NO, IT DOESN’T RAISE TAXES ON THE MIDDLE CLASS TO FUND TAX BREAKS FOR THE WEALTHY
Numerous Democrats both on and off Capitol hill have made the claim that the GOP bill will raise taxes on the middle class in order to give a tax break to the rich.
The Washington Post (which gave this claim four “Pinnochios”) traced this back to a Democratic talking point that seems to have gone through a tortured game of telephone.
In fact, the GOP tax bill gives almost everyone a tax cut, which is why it comes with a steep price tag.
We ran the numbers for a single individual making $50,000 and who (like roughly seven out of ten Americans) takes the standard deduction.
The GOP tax plan gave this person a $1,103 tax break in 2018.
And the tax break was significant even when we added several special circumstances into the mix.
Give the person the maximum student loan interest deduction of $2,500 (the GOP plan eliminates this deduction) and the House bill would still give them a tax cut of $563.
On top of that, make them a single parent and the GOP plan saves them $855 in taxes.
Add a second child to the mix and the GOP plan still gives this person an $848 tax cut.
You can dream up a hypothetical that would make this taxpayer pay more under the GOP plan, but it takes an exrtreme case.
Current law allows people to deduct medical bills paid out of pocket (and not paid through an HSA.) If our taxpayer had a big enough medical bill, they might not owe any taxes under today’s law. The GOP plan might cost a person in that situation thousands of dollars.
There are many other examples of tax situations that could make people pay more, but how often would that happen?
Turns out, people have studied that very question.
The nonpartisan Tax Policy Center, which is often cited by members of both parties, found that only seven percent of American taxpayers would pay more under the House version of the GOP plan. 76 percent of taxpayers will get a cut, the center says.
However, the picture grows less rosy as time goes by because the GOP plan doesn’t allow deductions to grow as much for inflation each year. By 2027, the same study figures 24 percent of taxpayers will pay more than they would under current law.
THE RICH DO BETTER THAN MIDDLE AND LOWER CLASS PEOPLE
There is part of the Democrat’s argument that checks out: the rich are better off than others under this plan.
That same study from the Tax Policy Center finds that the lowest-earning fifth of taxpayers will save only 0.4 percent on their taxes, or $60 on average.
The middle fifth of earners can expect to save 1.2 percent or $830.
And the top one percent of earners get a 1.7 percent tax cut worth an average $37,100.
There are several specific changes to the tax code that support this argument as well.
The House bill’s repeal of the estate tax only benefits the heirs of a fraction of a percent of Americans.
And middle and lower class people probably won’t benefit from a tax break aimed at owners of private jets.
The GOP plan would add $1.4 trillion to the defecit over ten years, according to the nonpartisan Congressional Budget Office.
Some have pointed to this as ironic, given the GOP’s past railing against the growing national debt.
THIS COULD ALL CHANGE
Again, the House and Senate could keep making tweaks to this plan all the way to Christmas. Maybe longer.
In fact, the IRS tells 9NEWS that there’s nothing that prohibits Congress from passing changes to 2018 tax law after 2018 begins.
Check out Verify: Who's telling the truth on taxes? (Part 2) for some of the answers to your questions.
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