Here Is The Full Text Of The Final Republican Tax Bill

Update: in addition to the previously leaked highlights (see below), Republicans on Friday evening released the final version of their legislation to slash tax rates for corporations and individuals. The 1,097 page document, containing the bill and an explanatory statement, was crafted by the House-Senate conference committee. The bill is expected to come up for votes in Congress next week.

Read the bill below, courtesy of The Hill:

The "shorter" - only 570 page long - explanatory statement of the conference committee can be found below:

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Earlier:

Here are the full policy highlights of the Republicans" Tax Cuts & Jobs Act...

Policy Highlights

The Tax Cuts and Jobs Act (H.R. 1) overhauls America’s tax code to deliver historic tax relief for workers, families and job creators, and revitalize our nation’s economy. By lowering taxes across the board, eliminating costly special-interest tax breaks, and modernizing our international tax system, the Tax Cuts and Jobs Act will help create more jobs, increase paychecks, and make the tax code simpler and fairer for Americans of all walks of life. 

With this bill, the typical family of four earning the median family income of $73,000 will receive a tax cut of $2,059.

For individuals and families, the Tax Cuts and Jobs Act:

Lowers individual taxes and sets the rates at 0%, 10%, 12%, 22%, 24%, 32%, 35%, and 37% so people can keep more of their hard-earned money.

Significantly increases the standard deduction to protect roughly double the amount of what you earn each year from taxes – from $6,350 and $12,700 under current law to $12,000 and $24,000 for individuals and married couples, respectively.

Continues to allow people to write off the cost of state and local taxes – just like current law – up to $10,000. Gives individuals and families the ability to choose among sales, income and property taxes to best fit their unique circumstances.

Takes action to support more American families by:

• Expanding the Child Tax Credit from $1,000 to $2,000 for single filers and married couples to help parents with the cost of raising children. The tax credit is fully refundable up to $1,400 and begins to phase-out for families making over $400,000. Parents must provide a child’s valid Social Security Number in order to receive this credit.


• Preserving the Child and Dependent Care Tax Credit to help families care for their children and older dependents such as a disabled grandparent who may need additional support.


• Preserving the Adoption Tax Credit so parents can continue to receive additional tax relief as they open their hearts and homes to an adopted child.

Preserves the mortgage interest deduction – providing tax relief to current and aspiring homeowners.

• For all homeowners with existing mortgages that were taken out to buy a home, there will be no change to the current mortgage interest deduction.


• For homeowners with new mortgages on a first or second home, the home mortgage interest deduction will be available up to $750,000.

Provides relief for Americans with expensive medical bills by expanding the medical expense deduction for 2018 and 2019 for medical expenses exceeding 7.5 percent of adjusted gross income, and rising to 10 percent beginning in 2020.

Continues and expands the deduction for charitable contributions so people can continue to donate to their local church, charity, or community organization.

Eliminates Obamacare’s individual mandate penalty tax – providing families with much-needed relief and flexibility to buy the health care that’s right for them if they choose.

Maintains the Earned Income Tax Credit to provide important tax relief for low-income Americans working to build better lives for themselves.

Improves savings vehicles for education by allowing families to use 529 accounts to save for elementary, secondary and higher education.

Provides support for graduate students by continuing to exempt the value of reduced tuition from taxes.

Retains popular retirement savings options such as 401(k)s and Individual Retirement Accounts (IRAs) so Americans can continue to save for their future.

Increases the exemption amount from the Alternative Minimum Tax (AMT) to reduce the complexity and tax burden for millions of Americans.

Provides immediate relief from the Death Tax by doubling the amount of the current exemption to reduce uncertainty and costs for many family-owned farms and businesses when they pass down their life’s work to the next generation.

For job creators of all sizes, the Tax Cuts and Jobs Act:

Lowers the corporate tax rate to 21% (beginning Jan. 1, 2018) – down from 35%, which today is the highest in the industrialized world – the largest reduction in the U.S. corporate tax rate in our nation’s history.

Delivers significant tax relief to Main Street job creators by:

• Offering a first-ever 20% tax deduction that applies to the first $315,000 of joint income earned by all businesses organized as S corporations, partnerships, LLCs, and sole proprietorships. For Main Street job creators with income above this level, the bill generally provides a deduction for up to 20% on business profits – reducing their effective marginal tax rate to no more than 29.6%.


• Establishing strong safeguards so that wage income does not receive the lower marginal effective tax rates on business income – helping to ensure that Main Street tax relief goes to the local job creators it was designed to help most.

Allows businesses to immediately write off the full cost of new equipment to improve operations and enhance the skills of their workers – unleashing growth of jobs, productivity, and paychecks.

Protects the ability of small businesses to write off interest on loans, helping these Main Street entrepreneurs start or expand a business, hire workers, and increase paychecks.

Preserves important elements of the existing business tax system, including:

• Retaining the low-income housing tax credit that encourages businesses to invest in affordable housing so families, individuals, and seniors can find a safe and comfortable place to call home.


• Preserving the Research & Development Tax Credit that encourages our businesses and workers to develop cutting-edge “Made in America” products and services. • Retaining the tax-preferred status of private-activity bonds that are used to finance valuable infrastructure projects.


• Eliminates the Corporate Alternative Minimum Tax, thereby lowering taxes and eliminating confusion and uncertainty so American job creators can focus on growing their business and hiring more workers, rather than on burdensome paperwork.

Modernizes our international tax system so America’s global businesses will no longer be held back by an outdated “worldwide” tax system that results in double taxation for many of our nation’s job creators.

Makes it easier for American businesses to bring home foreign earnings to invest in growing jobs and paychecks in our local communities.

Prevents American jobs, headquarters, and research from moving overseas by eliminating incentives that now reward companies for shifting jobs, profits, and manufacturing plants abroad.

For greater American energy security and economic growth, the Tax Cuts and Jobs Act:

Establishes an environmentally responsible oil and gas program in the non-wilderness 1002 Area of the Arctic National Wildlife Refuge (ANWR). Congress specifically set aside the 1.57-million acre 1002 Area for potential future development. Two lease sales will be held over the next decade and surface development will be limited to 2,000 federal acres – just one ten-thousandth of all of ANWR.

Significantly boosts American energy production. Responsible development in the 1002 Area will raise tens of billions of dollars for deficit reduction in the decades to come, while creating thousands of new jobs, reducing our dependence on foreign oil, and helping to keep energy affordable for American families and businesses.

Provides a temporary increase in offshore revenue sharing for the Gulf Coast in 2020 and 2021, allowing those states to invest in priorities such as coastal restoration and hurricane protection.

 

Republicans Reverse, May Allow State Income Tax Deduction

One day after the top Senate Republicans realized they probably should have read the tax bill they voted for in the deep of the night on Saturday morning, and announced they are seeking to repeal the Alternative Minimum Tax they passed just days earlier, realizing it could punish growing companies, they now also appear to be reversing on the controversial repeal of State and Local Tax Deductions, and as Bloomberg reports, Republican lawmakers "are discussing a compromise on state and local tax deductions that would allow taxpayers to deduct state income tax, House Ways and Means Chairman Kevin Brady said."

According to one proposal being discussed, taxpayers could deduct both their state income tax and state and local property taxes up to a combined limit of $10,000. This differs from the currently circulating bills which preserve the individual deduction for state and local property taxes - capped at $10,000 - but not for income taxes. The push to include income taxes could help those in high-tax states who don’t own property.

Mitch McConnell confirmed he’s open to tweaking final tax legislation to appease lawmakers who want to let constituents deduct state income taxes: "There’s some in the House who would like to see that applied not just to property, but to income tax, you know, where you can sort of pick which state and local tax you want to deduct,” the Kentucky Republican said on conservative radio host Hugh Hewitt’s show. “That sounds like a kind of reasonable idea.”

Summarizing the conference process, McConnell said "There are a lot of these things that are floating back and forth,” adding that he cannot predict “exactly how the final product turns out” once the House and Senate complete their conference negotiations.

Indicating that SALT repeal was conceived as an entirely political move meant to punish "rich", predominantly blue states, House Republican leaders - hearing significant pushback from their own constituents - signaled openness to "relieving the burden for residents of high-tax states."

Plans for the so-called SALT deduction have prompted more tension in the House than in the Senate, because there aren’t any Republican senators from states with the highest taxes. Twelve out of the 13 GOP House lawmakers who voted against the bill last month were from high-tax states. Still, including the property tax deduction in the Senate bill was a last-minute change to help get the support of Republican Senator Susan Collins of Maine.

 

Two House members from New Jersey -- Leonard Lance, a Republican, and Josh Gottheimer, a Democrat -- plan to submit a joint proposal to the conference committee that would maintain SALT in its entirety.

 

The lawmakers said repealing the break will lead to "double taxation" and "pay for reform on the backs of just a few states that already pay significantly more than other states in federal taxes." One of those net donor states, they note, is New Jersey.

Brady, who’s overseeing the House-Senate conference committee for tax negotiations, said Wednesday that allowing income tax deductions is one of five options on the table. Others include potential adjustments to rates, brackets, the individual alternative minimum tax and the family tax credit.

There is just one problem with the bill which is already cutting it dangerously close to the $1.5Tn extra deficit limit: where does the money come from?

As Bloomberg writes, it"s unclear how lawmakers would pay for any such modifications to the state and local tax break. Preserving the property tax deduction up to $10,000 would cost about $148 billion over a decade, according to the Joint Committee on Taxation. McConnell has been said to want any proposed changes presented with ways to pay for them.

Among the proposed revenue offset include changing estate tax rules about stepped-up basis and closing what they call a loophole for charitable donations to private foundations as ways to offset some of the lost revenue that would result from keeping SALT.

Taxes: Here"s What"s Going To Stay The Same

Authored by Simon Black via SovereignMan.com,

On October 3, 1913, US President Woodrow Wilson signed the Underwood-Simmons Act into law, creating what would become the first modern US income tax.

The legislation (at least, the income tax portion) was only 16 pages and imposed a base tax rate of just 1%.

The highest tax rate was set at 7%– and it only applied to individuals earning more than $500,000 per year, which is about $12.6 million today according to the Bureau of Labor Statistics.

And individuals earning less than $3,000 (about $75,000 today) were exempt from paying tax.

Tax rates moved up and down over the years– the government raised rates to fund World War I, then lowered them in peacetime.

In fact, taxes were cut at least four separate times during the 1920s alone, reaching a low in 1929 of just 0.375% for the bottom tax bracket.

Back then, making major changes to tax law was pretty simple. Today, thanks to heavily vested interests on all sides, it takes a miracle to make any serious modifications to the tax code.

That’s why there hasn’t been any significant tax reform in the Land of the Free since Crocodile Dundee was the #1 movie in America (that’s 1986, by the way).

There are now two versions of legislation that will make major changes to the US tax code– one in the Senate and one in the House of Representatives.

I spent most of the nearly 30 hours of travel time during flights over the past week from Santiago to Sydney, Sydney to Bangkok, and Bangkok to Singapore, reading the proposals’ 400+ pages.

The media is touting these bills as a ‘major overhaul’ and ‘comprehensive reform,’ and financial markets have been treating this legislation as if the second coming of capitalism is walking across the water.

It’s not.

Sure, there are a few significant changes.

They’re scrapping the idiotic Alternative Minimum Tax, which ensnares more and more people each year.

Tax rates on certain business profits are going down substantially.

And they’re making tax reporting a lot simpler, saving countless hours of senseless paperwork.

Undoubtedly there are plenty of positive changes in this proposed tax code.

There are also plenty of negative changes.

Some people will benefit. Others will see their tax bills grow.

But for the most part the tax code will stay the same– they’re essentially just rearranging the pieces on the board rather than coming up with an entirely different game.

The existing tax code is built on a legal framework that goes back to the 1950s… a time when manufacturing and agriculture were economic mainstays.

Businesses rarely outsourced their production back then or even thought about selling their products overseas.

Entrepreneurship was uncommon. Employees often remained with the same company for decades. And few women were in the labor force.

Today it’s completely different. The digital economy has displaced manufacturing; business is now dominated by ideas, not factories.

And it’s easier than ever before in human history to start a business, sell products and services worldwide, and even hire employees who live on the other side of the planet.

It seems ludicrous to govern the digital, global businesses of the 21st century with such an antiquated, industrial-era tax code.

True reform would have started by throwing all of it in the garbage, right where it belongs.

You wouldn’t even have to reinvent the wheel; there are plenty of great examples in the world of tax systems that work extremely well– like right here in Singapore.

Singapore’s government is awash with cash.

They almost always run a small budget surplus, yet they’re able to provide ample public services, world class health care, high quality education, strong national defense, pristine infrastructure, and a substantial reserve fund.

But at the same time they encourage people to become wealthy, ensuring that they keep the vast majority of what they earn.

Tax rates in Singapore are quite low and incredibly competitive. Whereas the US corporate tax rate may drop to as low as 20%, in Singapore a company pays no more than 17%, and typically less than 10%.

Right now I’m in the process of negotiating the sale of an asset we purchased here a couple of years ago which will likely produce several million dollars in net realized gains once the deal is closed.

But we won’t pay a dime of tax here on any of it… because Singapore does not tax capital gains.

It’s a model that works: Singaporeans have one of the highest standards of living in the world… plus there are more millionaires per capita here than in any other country.

And this country is just one example. There are plenty more.

Point is, while it’s nice that they’re trying, it’s going to be very difficult for the US government to achieve anything meaningful or truly revolutionary when they’re essentially just making some changes to the pitifully outdated, existing tax code.

But the good news is that, even though the euphoria and expectations about this new proposal are totally overblown, there are still plenty of gems from the current tax code that aren’t going anywhere.

For example– if you’re a self-employed professional and you’re worried that the new tax code will probably increase your tax bill, you still have some excellent options.

There’s nothing in the proposed law that changes, for example, the substantial tax benefits you can realize from establishing a solo 401(k) or SEP IRA plan.

Nor did I see anything changing the enormous benefits from setting up a captive insurance company (in which you effectively insure yourself against certain risks, shielding up to $2 million per year from taxation).

Those are still fully intact.

So is the US federal tax exemption for certain legal residents of US territories. Which means that you can still qualify for Puerto Rico’s ultra-generous 0%/4% tax incentive programs.

There are dozens of other great tax strategies from the old tax code which will remain.

To continue learning how to legitimately reduce your taxes, I encourage you to download our free Perfect Plan B Guide.

GOP Tax Plan "Talking Point" Highlights Released

Moments ago, the GOP released the "talking point" highlights of the republican tax plan which, as previewed earlier this morning, will keep the 20% corporate tax cut as permanent, and which allegedly will assure that a family of 4 making $59,000 will get a $1,182 tax cut.

As discussed previously, the bill keeps a top rate of 39.6% for the highest-earners and doubles the standard deduction for middle class families. It expands the child tax credit to $1,600 from $1,000 and will not make any changes to the 401(k) plans. The bill also “makes no changes to the popular retirement savings options that Americans have today — including 401(k)’s and Individual Retirement Accounts, or I.R.A.s. Americans will be able to continuing making both traditional, pretax contributions and ‘Roth’ contributions in the way that works best for them.”

So far so good; where there will be problems however, is that the bill also includes the repeal of an itemized deduction for medical expenses, a key provision for households with extraordinary health-care costs. It also repeals the tax credit for adoption and the deduction of student-loan interest. The bill also limits the home mortgage interest deduction: for new home purchases interest would be deductible only on loans up to $500,000, down from $1 million, although existing loans would be grandfathered.

A key issue will be the treatment of the state and local tax deduction, which lawmakers are proposing to cap at $10,000. That will not be enough for Republicans in some high-tax states, where middle-class families make heavy use of the deduction. As the NYT notes, "the compromise, as it had been sketched out this week, would preserve the deduction for property taxes, but not for state and local income taxes, and it appeared as if there would be a cap on the deduction. But at first glance, it did not appear as if that was enough to win over all of the New York and New Jersey members."

Here are the most notable changes:

• Lowers individual tax rates for low- and middle-income Americans to Zero, 12%, 25%, and 35%; keeps tax rate for those making over $1 million at 39.6%


• Increases the standard deduction  from $6,350 to $12,000 for individuals and $12,700 to $24,000 for married couples.


• Establishing a new Family Credit, which includes expanding the Child Tax Credit from $1,000 to $1,600


• Preserving the Child and Dependent Care Tax Credit


• Preserves the Earned Income Tax Credit


• Preserves the home mortgage interest deduction for existing mortgages and maintains the home mortgage interest deduction for newly purchased homes up to $500,000, half the current $1,000,000


• Continues to allow people to write off the cost of state and local property taxes up to $10,000


• Retains popular retirement savings options such as 401(k)s and Individual Retirement Accounts


• Repeals the Alternative Minimum Tax


• Lowers the corporate tax rate to 20% – down from 35%


• Reduces the tax rate on business income to no more than 25%


• Establishes strong safeguards to distinguish between individual wage income and “pass-through” business income 


• Allows businesses to immediately write off the full cost of new equipment


• Retains the low-income housing tax credit

A visual summary of the new tax brackets:

And the full document:

Trump Tax Plan To Benefit "Top 1%" Most, Cost $2.4 Trillion, Middle Class To Pay More Taxes

Based on what we already know about the proposed Trump tax reform, which can be summarized as follows:

• collapse the seven individual income tax rates to three (12, 25, and 35 percent),


• increase the standard deduction,


• eliminate personal exemptions,


• increase the child tax credit,


• eliminate most itemized deductions,


• repeal the individual and corporate alternative minimum taxes,


• repeal the estate tax,


• reduce the corporate tax rate from 35 to 20 percent, tax pass-through business income at a top rate of 25 percent,


• allow businesses to fully expense investment in equipment and machinery for at least five years,


• adopt a territorial tax system that would exempt the foreign earnings of US corporations from US tax

... moments ago the Tax Policy Center released its analysis of what the practical impacts of the Trump tax plan will be on the broader population. Below we present the key findings.

The tax plan will cost $2.4 trillion over the first decade and $3.2 trillion over the second dacade, on a static basis

• The proposal would reduce federal revenues by $2.4 trillion over the first ten years and $3.2 in the second decade. This means that absent a matched deduction in spending, US deficit and debt will increase by a similar amount. This is a problem as a Senate GOP budget resolution unveiled on Friday only allows for adding $1.5 trillion to the debt, implying a revenue shortfall of just under $1 trillion.
  
  • The business income tax provisions—including those affecting corporations and pass-through businesses—would reduce revenues by $2.6 trillion over the first ten years. Elimination of estate and gift taxes would lose another $240 billion. The individual income tax provisions (excluding those related to business income) would increase revenues by about $470 billion over the same period.
  
  

While many Americans will benefit, the biggest gains will go to the 1%, whose after-tax income would increase by over 8%.

• In 2018, the average tax bill for all income groups would decline: taxpayers in the bottom 95 percent of the income distribution would see average after-tax incomes increase between 0.5 and 1.2%. However, and where the Democrats will have a field day, taxpayers in the top 1 percent (incomes above $730,000), would receive about 50 percent of the total tax benefit; their after-tax income would increase an average of 8.5 percent.

• Between 2018 and 2027, the average tax cut as a share of after-tax income would fall for all income groups other than the top 1 percent. In 2027, taxpayers between the 80th and 95th percentiles of income (between about $150,000 and $300,000) would experience a slight tax increase on average.

The problem is that at the same time, taxes for substantial portion of taxpayers will go up:

• In 2018, about 12% of taxpayers would face a tax increase of roughly $1,800 on average. Where it gets worse is that many of those who form the backbone of the upper-middle class, or more than a third of taxpayers making between about $150,000 and $300,000, will pay more, mainly because most itemized deductions would be repealed.

Fast forward to 2027, when the overall average tax cut would be smaller than in 2018, increasing after-tax incomes 1.7 percent. Taxpayer groups in the bottom 80 percent of the income distribution—those making less than about $150,000—would receive average tax cuts of 0.5 percent or less of after-tax income. However, taxpayers making between about $150,000 and $300,000 would on average pay about $800 more in taxes than under current law. And the one item which Democrats will love: about 80% of the total benefit would accrue to taxpayers in the top 1 percent, whose after-tax income would increase 8.7 percent.

It gets worse: by 2027, taxes would rise for roughly one-quarter of taxpayers, including nearly 30 percent of those with incomes between about $50,000 and $150,000 and 60 percent of those making between about $150,000 and $300,000.

According to the Tax Policy Center, the number of taxpayers with a tax increase rises over time. This is because the plan would replace personal exemptions, which are indexed for inflation, with additional credits for children and non-child dependents that are not indexed for inflation. In addition, indexing tax brackets and other parameters to the slower-growing chained Consumer Price Index means that over time more income is subject to tax at higher rates.

Finally, there is of course, the repeal of the state and local tax deduction, a move which is expected to be widely hated by homeowners across the US, but as the chart below shows, by democrat states far more than republican states.

As BofA writes, blue states with high state and local taxes will be the most adversely impacted from the loss of this deduction. Thus, opposition in the Senate will mainly come from Democrats, while Republicans will mostly be on the same page. But, the situation should be more contentious in the House. Data from the Tax Policy Center reveals that 26 of the top 50 districts in terms of SALT deduction usage had a Republican representative. Republicans will likely face more internal pushback from these members. Ultimately, a House bill would fail if two dozen Republicans (and every Democrat) were opposed.

More in the full report below (link):

Stockman Slams Trump's "1500-Word Airball" Tax Plan

Authored by David Stockman via The Daily Reckoning,

The Donald’s strong point isn’t his grasp of policy detail.

The nine page bare-bones outline released this week is nothing more than an aspirational air ball that lacks virtually every policy detail needed to assess its impact and to price out its cost.

It promises to shrink the code to three rates (12%, 25%, 35%), for example. But it doesn’t say boo about where the brackets begin and end compared to current law.

Needless to say, a taxpayer with $50,000 of taxable income who is on the 15% marginal bracket today might wish to know whether he is in the new 12% or the new 25% bracket proposed by the White House. After all, it could change his tax bill by several thousand dollars.

Similarly, to help pay for upwards of $6 trillion of tax cuts over the next decade, it proposes to eliminate “most” itemized deductions. These “payfors” would in theory increase revenues by about $3 trillion.

Then again, the plan explicitly excludes the two biggest deductions — the charitable deduction and mortgage deduction — which together account for $1.3 trillion of that total.

And it doesn’t name a single item among the hundreds of deductions that account for another $1 trillion of current law revenue loss. They’re just mystery meat to be stealthily extracted during committee meetings after Congressman have run the gauntlet of lobbyists prowling the halls outside.

Stated differently, after nine months of work these geniuses have come up with $6 trillion of easy to propose tax rate cuts and virtually no plan whatsoever to pay for them.

In fact, this latest nine pages of puffery contains just 1,500 words — including obligatory quotes from the Donald and page titles.

I hate to get picky, but the Donald’s team has been on the job for 250 days now. And all they came up with amounts to just three words each per day in office.

Worse still, even as this “framework” opens the door to unrelenting demagoguery from the Dems about helping the rich, it does virtually nothing for Flyover America.

And it surely leaves the rust belt workers who voted for Trump in western Pennsylvania, industrial Ohio, the Michigan auto belt and the manufacturing centers of Wisconsin and Iowa with absolutely nothing to show for their efforts.

That’s right. There are 122 million tax filers in the U.S. (or 83% of the total) with AGI (adjusted gross income) under $100,000. And they would get essentially zero net cuts under the vague scheme presented Wednesday. Most pay virtually no Federal income tax anyway.

But you would never have guessed that the new nine-page plan is one big nothingburger for the bottom 83% of taxpayers based on the Donald’s oratory at Indianapolis yesterday. He essentially preached a storm in favor of the “little guy.”

That is, the Donald’s narrative was the same old threadbare story which claims the average worker is being crushed by Federal income tax payments and gets unfairly tangled up in the complexity of the IRS code without the benefit of high-priced tax lawyers and loophole-savvy financial advisors.

Accordingly, the Donald promised to “unrig” the tax code for these little guys, thereby keeping faith with the millions of dispossessed citizens of Flyover America who voted for him last November.

Except, except… the whole Indianapolis narrative is essentially nonsense.

This isn’t 1981 and there is no raging inflation and bracket creep propelling the middle class into tax tyranny. In fact, owing to indexing and large increases in the standard deduction and personal exemption over the last 35 years, the income tax has essentially morphed into a Rich Man’s Tax.

Stated differently, the Donald’s new tax reform airball promises to make filing with the IRS more palatable to rank and file America. Yet 101 million taxpayers (69%) have no exposure to the complexity of the IRS code at all. They owe virtually nothing.

And I mean nothing. Among the 148 million income tax filers, the bottom 53 million owed zero taxes in the most recent year (2014), and the bottom half (74 million) paid an aggregate total of just $45 billion.

So let me be very clear. There was still $4 trillion left in the collective pockets of these 122 million taxpayers — even after the IRS had its way with them!

By contrast, the top 4% or 6.2 million filers paid $802 billion in Federal income taxes. That amounted to nearly 58% of total Federal income tax payments.

Now, I do not object to putting some of that $802 billion back into the pockets of the top 4% — given that many of them are small businessmen and the proverbial “job-creators” who make the economy grow.

But incentivizing the job creators in this manner should not be financed on the backs of future taxpayers via borrowing. It must be paid for with spending cuts as a first resort, and less onerous taxes — such as consumption taxes.

Even if a Keynesian demand side tax cut was a good idea, which it isn’t, the fact is there is not much more that could be put “back in their pockets” by means of income tax cuts.

So the truth is, you could have scratched this so-called “framework” on a yellow pad in one hour on January 20 if you had even a general grasp of Trump’s vague campaign promises.

But had you stopped there you should have been promptly fired because in the form presented Wednesday the plan is a minefield of unanswered questions. It will tie the Congressional tax-writing process in knots for months to come — if not indefinitely.

Beyond that, there is another factor that shows why the Donald is barking up the wrong tax tree. The Fed has generated such gigantic financial bubbles and caused all financial assets to become so massively overvalued that incentives for the rich are not really in short supply.

Stated differently, Janet Yellen and the other Keynesian liberals on the Fed have generated more “trickle-down” wealth and rewards than the Gipper could ever have imagined back in 1981.

The $45 trillion in household wealth gains since the 2009 bottom — which has overwhelmingly accrued to the top tier of households which own most of the financial assets — vastly overshadows any possible benefits from lower tax rates, even at the top of the income ladder.

If the bottom 83% don’t pay much tax in the first place, and if the top 4% who pay most of the taxes are not to be indulged for social policy/equity purposes, what’s the point of the whole income tax cut charade?

In fact, that’s why after nine months the Trump tax plan is still a 1,500 word air ball.

What it actually amounts to is amateurish stumbling around the K-Street corridor where every single “loop-hole” that can’t be named will be shot down.

In all, this plan is so embarrassingly weak that Mnuchin and Cohn should be fired on the spot.

Yesterday also demonstrates why the casino is such a dangerous fantasy land. It rose to yet another all-time high Wednesday apparently on the back of a tax cut plan that is virtually guaranteed to eat itself alive on Capitol Hill.

The chickens are coming home to roost. Indeed, if such domestic fowl could fly Washington’s skies would soon be dark with them.

Realtors Warn Of "Another Housing Crash" If Mortgage Tax Deductions Are Scrapped

After failing miserably if their efforts to repeal and replace Obamacare, Republicans are set to shift their legislative agenda to focus on tax reform when they get back from their generous month-long August recess (taxpayers are such great employers).  Among other things, proposed changes to the personal tax code would include eliminating nearly all tax write-offs, including those for state and local taxes, and instead doubling the standard deduction.

Of course, potentially no industry would be more impacted by such a move as the housing market which has sparked a slight panic at the National Association of Realtors (NAR).  As Reuters points out this morning, roughly 30 million taxpayers taxpayers claim mortgage interest deductions totaling some $70 billion each year which provides a huge incentive to own a home.   

The National Association of Realtors issued an "August Recess Talking Points" circular imploring members to remind lawmakers that "Homeowners must be treated fairly in tax reform" to avoid "another housing crash."

The group cited a report it commissioned from PwC that estimated home values could quickly dive more than 10 percent if the tax plan becomes law.

Currently, about 30 million taxpayers claim the mortgage interest deduction, with about $70 billion in total claims, according to Robert Dietz, an economist with the National Association of Homebuilders.

Estimates suggest more than half of taxpayers would stop itemizing under the proposed plan, Dietz said, warning that this would create a large ripple effect through the economy. He said people in early years of a mortgage would suffer most, along with prospective home buyers.

Meanwhile, talking points distributed by NAR, intended to give realtors around the country ammunition against their elected officials while they"re "vacationing" in their districts, warns that tampering with the mortgage deduction could cause "home values everywhere to plunge" resulting in many homeowners once again going "under water" on their primary asset.

-  Proposals limiting tax incentives for homeownership would cause home values everywhere to plunge. Estimates provided by PwC show that values could fall in the short run by more than 10 percent if a Blueprint-like tax reform plan were enacted. The drop could be even larger in high-cost areas.   It may take years for home values to rebound from such a significant decrease.

-  With a reduction in values of this size, homeowners with relatively small amounts of equity would again see their mortgages go under water, finding they owe more than what their home is worth. For many, this will lead to defaults, foreclosures, or short sales, creating havoc for families, neighborhoods and communities.

-  The home is the most valuable asset for most owners. Millions of families have built equity for years with the hope of using it to help pay for retirement or college for children. Many of these dreams would evaporate.

But it"s not just the housing market that would be impacted as the CEO of the American Red Cross warned that removing charitable deductions would be "devastating" for non-profit organizations that currently collect some $13 billion worth of tax-deductible donations annually.

Charitable organizations are not arguing against increasing the standard deduction. But they are asking members of Congress to consider creating a “universal deduction,” so taxpayers taking the standard deduction can get additional credit for donations without itemizing.

Taxpayers claim an estimated $13 billion each year in charitable deductions. Charities fear giving would plummet if the standard deduction were doubled without creating a universal deduction.

Gail McGovern, president and CEO of the American Red Cross, said reducing charitable deductions would be “devastating.”

But it"s probably no "yuge" deal...the U.S. housing stock is only worth about $30 trillion so we"re sure the homebuilders and lenders can absorb a small $3 trillion valuation loss, right?

Trump's Tax Reform Plan: A Cheatsheet Of What Is Known, Leaked, And Is Still Unknown

On Wednesday, the President will reveal a "broad-stroke" vision on his tax reform plan. Coutest of Citi and various media sources, here is a detailed cheatsheet of what is known, what remains unknown and what has been leaked.

All the latest: Tax reform, shutdown, protectionism & Fed buzz

• To keep the Administration tax reform priorities live amid Congressional budget shutdown aversion negotiations, President Trump has signaled the release of a preview of the pending June OMB budget, this Wednesday. That means tax reform details.


• There is no set time for President Trump’s announcement. Spicer did not commit to timing during the daily White House briefing but there’s been a chorus of warnings:
  
  • Spicer said: “And so we will continue to engage in that discussion and outside stakeholders to try to get a plan really put together and details laid out in the next several weeks once we make the announcement tomorrow.”
  
  
  • Mulvaney says budget with detailed scoring still is projected for release in June, but the White House will focus upon “principles, ideas, and [tax] rates” for Wednesday.
  
  
  • Senate Majority Lead Mitch McConnell has provided similar sentiments, saying that reform rumors “not worth anything at this point.” He favors treating all businesses “similarly” when it comes to tax reform and says it’s clear Congress will need to use a reconciliation vehicle for tax reform.
  
  
  • “We will be disappointed on Wednesday when we see that this is the big announcement,” one lobbyist told Politico. “They should not be building this up for a big nothing burger.”
  
  


• Remember, US Treasury Secretary Mnuchin is slated to discuss tax reform initiatives as a part of The Hill’s Newsmaker Series on Wednesday from 8:00 EDT to 9:35 EDT. The Hill previews this event saying that he will be interviewed, “about the administration’s priorities and timeline for tax reform.” See the announcement here, which also notes: “After the interview with the Treasury secretary, tax and budget experts will participate in a panel discussion about the prospects for tax reform.


• On Tuesday, the market saw the following leak. Note that most of this is no different from the vision Trump has communicated before:
  
  • WSJ says Trump’s plan intends to extend the 15% corporate tax rate to pass-through businesses, which while a standing part of Trump’s vision, an important detail.
  
  
  • WSJ also claims White House officials also are considering proposing a territorial tax system, the people said. In such a system, US corporations would pay little or no tax on future foreign earnings.” Read more here.
  
  
  • Politico has published an article detailing what is currently expected of the Trump tax plans. It claims:
    
    • Marquee policy ideas are expected to include infrastructure spending and a childcare tax credit. Infrastructure looks to be linked to corporate repatriation.
    
    
    • Not likely to include the border adjustment tax (BAT), which House Speaker Paul Ryan hoped would generate USD1.2bn in revenues to fund other aspects of reform. NYT followed in late NY backing this with reports, which also suggest that BAT–lite is out the picture as well.
    
    
    • Expected to tout a corporate rate of 15% (as noted other places); and not expected to include details on ways to offset new spending, or deep tax cuts.”
    
    
  
  
  • Senate Majority Lead Mitch McConnell has lifted spirts by saying he’s hopeful well get a spending agreement in the next few days; doesn’t want to talk about a short-term CR yet.
  
  


• Late on Tuesday, Bloomberg reported that repatriation of corporate foreign earnings will be taxed at 10% in President Trump’s tax plan, according to a White House official.


• CNBC reports that Trump"s tax reform plan may include a placeholder for border tax, citing an official.


• Trump’s tax proposal doesn’t call for repealing the corporate alternative minimum tax, as Trump’s campaign plan stated


• There have been no major leaks regarding how defense will fit in the big picture but note these are important aspects of the conversation. Citi Economics expects the plan to up spending in these areas at the expense of nondefense.


• There have also been no major leaks (outside of the childcare tax credit) regarding personal income tax changes. Trump, before, has been a proponent of:
  
  • Alleviating taxes for Americans making less than 50k
  
  
  • Simplifying the American tax code into four brackets – 33%, 35% and 12% - down from seven brackets ranging 10% to 39.6%, while also eliminating the marriage penalty and Alternative Minimum Tax.
  
  
  • Eliminating the death tax
  
  


• As Mnuchin has emphasized in recent days, the reform plan is based on the idea of dynamic scoring.  Dynamic analysis accounts for the macroeconomic impacts of tax, spending, and regulatory policy, while dynamic scoring uses dynamic analysis in estimating the budgetary impact of proposed policy changes. Ultimately, the Trump Administration believes its policies will generate growth above 3.0%YoY, which can pay for the plan. The challenge is that it has to sell this view to Congress.


• McConnell is aiming for a long-term government bill and sees it clear that Congress will need to use a reconciliation vehicle for tax reform. This point is very important but to illustrate this, one has to understand the reconciliation process.
  
  • The Center on Budget and Policy Priorities helps define it. Created by the Congressional Budget Act of 1974, reconciliation allows for expedited consideration of certain tax, spending, and debt limit legislation. In the Senate, reconciliation bills are approved with a simple majority of 51. To start the reconciliation process, the House and Senate must agree on a budget resolution that includes “reconciliation directives” for specified committees in the House and Senate. Those committees must report legislation by a certain date that does one or more of the following:
    
    • Increases or decreases spending (outlays) by specified amounts over a specified time;
    
    
    • Increases or decreases revenues by specified amounts over a specified time; or
    
    
    • Raises or lowers the public debt limit by a specified amount. 
    
    
  
  


• Republicans could pursue tax reform under the budget reconciliation process, meaning the Senate would pass bills related to the budget – but reconciliation requires a bill to reduce the deficit over the long-term.Post 10y, scoring has to indicate that the bill will be revenue neutral or revenue positive or it doesn’t work.  


• That looks to be exactly why Republicans wanted to prioritize healthcare reform: the Congressional Budget Office estimated the American Health Care Act would reduce federal deficits by USD337 billion over the next 10y. Given that tax reform estimates signal a revenue burden, various political analysts posit that Republicans have been looking to repeal Obamacare to pay for some parts of tax reform.


• Without healthcare reform, Republicans could face challenges getting a revenue neutral, long-term tax reform.
  
  • The Tax Policy Center estimates that Trump"s plan for a 15% corporate tax rate would decrease federal revenues by USD2.3tn between 2016 and 2026. Trump"s campaign tax plan for corporations and individuals could cause revenue to drop by roughly USD6tn between 2016 and 2026, according to the projections.
  
  
  • The Tax Policy Center is left-leaning but is being heard out. Even Senate Finance Chairman Orrin Hatch has said a 15% corporate tax would increase the deficit and if the overall plan doesn’t include border adjustment tax – or borrow funds via healthcare reform – Republicans will haveto find revenue streams.
  
  

How Trump's Tax Changes Will Impact You?

"Reduce taxes across-the-board, especially for working and middle-income Americans" - that was Trump’s campaign pledge. And now he is about to move into the White House and is backed by Republican majorities in both House and Senate, he has a real shot at fulfilling that pledge to the letter. So, what are the specifics of his plan, and how would it affect you?

As HowMuch.net details, first and foremost, Trump’s income tax reform is a simplification: he wants to cut down the number of tax bands from seven to three. But simplifying is not necessarily the same as reducing taxes. As this graph demonstrates, some taxpayers would definitely benefit from Trump’s tax reform – especially those at the higher end of the income scale. There are others, however, who would see their tax rates go up. Especially those on lower incomes.

The current income tax bands range from 10% and 15% at the lower end of the scale over 25%, 28%, 33% and 35% in the middle to the top band of 40%. Under the Trump plan, only three tax bands would remain: 12%, 25% and 33%.

This would be good news for everyone currently in the top two brackets (35% and 40%). These taxpayers would see their effective rate drop down to 33%, by 2 and 7 percentage points respectively. Conversely, the simplification would bad news for the taxpayers in the lowest bracket (10%). These would see their effective tax rate go up by 2 percentage points, to 12%.

But even in the middle, where many would stay in the same bands as before (25% and 33%), there would be losers as well as winners. Most people in the 15% bracket would drop down to a 12% rate. But a tiny sliver of top earners in this bracket (earning between $37,500 and $37,650) would have the misfortune of seeing their effective tax rate go up by 10 percentage points, to 25%.

A similar thing would happen to the old 28% bracket: taxpayers with incomes between $91,150 and $112,500 would drop three percentage points to 25%, while those between $112,500 and $190,150 would see their tax rate go up 5 percentage points to 33%.

All income amounts quoted here apply to single filers (left side of the graph); but the graph also shows the changes for joint filers (on the right). The calculation is pretty easy – double the amounts for the single filers.

The graph does not take into account other aspects of the Trump tax plan not directly related to the changes to income tax bands, such as the increase of standard deductions and a cap on itemized deductions, although of course these would also have an impact on net incomes.