On November 16th, the House of Representatives passed a tax reform bill, and within the next week, it is expected the Senate will vote on their version of the bill. There are major differences between the House and Senate versions, and to become law, both houses of Congress must come together to develop and pass a single piece of legislation. As they stand, these bills both provide large, long-term tax breaks for corporations and the very wealthy, with smaller, short term cuts for middle class individuals. Should Congress succeed in passing tax reform legislation in either bill’s current form, there are considerable implications for our communities.
The Senate tax bill includes an elimination of the ACA’s individual mandate. The individual mandate helps stabilize the health insurance market. Without the penalty for not having insurance, experts believe the cost of insurance will skyrocket, leading to a loss of coverage for millions of people. This rise in insurance premiums will likely cancel out any tax breaks for the middle class and will be coupled with an increase in subsidies, increasing federal cost.
The tax bill will increase the federal deficit by $1.5 trillion and trigger mandatory offsets, likely to include cuts to Medicare. The Congressional Budget Office estimates Medicare would be cut $25 billion each year for a decade. These cuts will result in loss of coverage and services.
Health Expense Deduction
The House bill includes an elimination of the deduction for health expenses that are over 10% of household income, exacerbating the cost of healthcare for the extremely ill.
Both bills double the standard deduction for single and married individuals, which is positive for many individuals and families. This increase in the standard deduction reduces the amount of income on which individuals or couples must pay federal taxes, but is countered by the elimination of the Personal Exemption, which also allows for untaxed income. Both bills eliminate the deduction for state and local income and sales tax (SALT). The House bill retains part of the property tax deduction, capping it at $10K, while the Senate repeals it entirely. Both bills increase the child tax credit for each child and for other dependents. In the Senate version of the bill, unfortunately many beneficial tax cuts for the middle class expire in 10 years.