What You Need to Know About Recent Changes to the Senate Tax Bill
The Senate is busy this week amending the tax bill that will make major changes to our existing tax code . While nothing has been set in stone yet (it is expected to be passed by the Senate after Thanksgiving), there have been some notable changes in the recent round of revisions.
Perhaps the most notable change concerns the individual mandate of the Affordable Care Act. With this mandate, most Americans have to pay a fine if they miss out on health insurance, and the new law aims to abolish it. The Congressional Budget Office (CBO), the non-partisan agency that processes numbers when such bills appear, estimates that the change would reduce the federal deficit, but also lead to a 13 million increase in the number of uninsured people by 2027 and an increase in insurance premiums. Here is their full assessment in detail (PDF) .
In addition, the proposed changes include:
- Seven tax categories (10%, 12%, 22%, 24%, 32%, 35%, 38.5%) with small cuts in individual tax rates, which will expire in 2025. The corporate tax cut (large, from 35% to 20%) will be permanent.
- The child tax credit, which was previously proposed to be increased to $ 1,600, will increase further to $ 2,000. But this change will expire again in 2025.
- The plan will also expand tax breaks for transit businesses, but these will also expire in 2025.
According to the New York Times , most taxpayers will receive tax cuts next year with these changes. But according to the CBO, the bill will also add more than $ 1.4 trillion to federal debt over the next ten years. The tax cuts that most of us will see will also lessen over time as, of course, some of those cuts will expire.
The Times has illustrated several charts that show how the proposed changes will affect you based on your income. Households with the lowest income (less than $ 25,000) will be cut by $ 60 in 2018. Median income (US $ 48,600 – US $ 86,100) will be reduced by US $ 840 and the highest income households by approximately US $ 178,000. However, unlike other tax categories, the savings for the highest earners increase over time. Again, nothing is set in stone, but you can see how the proposed changes will affect you in these charts.