You’ve probably already heard that Trump and Republicans are determined to lower the statutory tax rate for corporations from 39 to 20 percent. I mentioned previously that during the Obama presidency, Democrats were willing to consider lowering that rate to 25 percent in exchange for closing some of the loopholes that allow many large corporations to pay a much lower “effective rate”—or nothing at all. Republicans weren’t interested.
But they don’t seem to have any problem with closing loopholes that benefit working Americans. Michael Hiltzic has a good rundown of the ones that have been targeted for elimination in the House tax cut bill. Here is a list of people that would be affected:
- People with student loans – The tax bill would eliminate tax deductions for interest on student loans.
- Teachers – A deduction of up to $250 for classroom supplies purchased by teachers out-of-pocket was made “permanent” by Congress in 2015. Not so permanent, as it turns out: The tax bill would eliminate the deduction.
- People with high medical costs – The tax plan eliminates a deduction for catastrophic medical expenses…The deduction may be especially important for families with members in assisted living or nursing care; they’re more likely to incur costs in excess of 10% of their income, and the deduction protects at least part of their dwindling assets.
- People who adopt children – The bill repeals the adoption tax credit, which allows families to offset up to $13,570 in taxes for every child adopted out of foster care.
- People with property and casualty losses – Despite a surge of weather-related disasters in Texas, Florida and Puerto Rico, the tax bill would repeal deductions for property and casualty losses.
He also includes a list that he calls “a host of petty nuisance cruelties.”
Beyond these provisions, the tax bill would take away modest deductions and exclusions that help ordinary people live their lives. Moving expenses, which are currently deductible if a worker is moving at least 50 miles to take a new job, would remain part of taxable income. Alimony currently can be deducted by the payer if it’s declared as income by the recipient; the bill would remove that choice, requiring instead that it be declared as income by the payer. Tax preparation costs, including accountants’ fees and the price of tax software, would no longer be deductible by taxpayers using the itemized deduction.
I would add two groups that are targeted indirectly.
- People who are disabled – Small businesses would lose the tax credit for creating access for disabled employees.
- Veterans – The Work Opportunity Tax Credit, which creates an incentive for hiring veterans, would be repealed.
Isn’t that lovely?
I’m sure Speaker Paul Ryan would suggest that this is all in an effort to simplify the tax code so that you can file on a postcard. Spare me the concern unless you’re willing to “simplify” the tax code for big corporations by closing some of their loopholes.
