This is a bullet point overview of the “Protecting Family and Small Business Tax Cuts Act of 2018” (HR 6760), the “Family Savings Act of 2018” (HR 6757) and the “American Innovation Act” (HR 6756), that are collectively referred to as “Tax Reform 2.0” as passed by the House of Representatives on September 27-28, 2018. The bills are NOT expected to become law as passed because the overwhelming economic impact is to further widen the wealth gap between the ultra-rich and the other 98% of us voters and taxpayers.
Key provisions are:
- Makes most of the temporary tax cuts for individuals passed in 2018 a permanent part of tax law.
- Allows IRA contributions past age 70 1/2.
- Removes required minimum distributions for smaller IRA accounts.
- Allows penalty-free withdrawals for expenses related to a child.
- Establishes a new type of tax-favored account called a “Universal Savings Account”.
- Allows more small business startup costs to be deducted in the first year of the business.
Third party economic impact analysis of the proposed law by Wharton, Taxpolicy and others shows a $600+ Billion windfall would go to the top 2% wealthiest people and less than 2% of the total benefit to the rest of us. For that reason, the bill is unlikely to become law as passed by the House of Representatives.
Features 2 and 3 above are more likely to become law through some other future means, according to a range of tax commentators.
The most significant and most discussed aspect of Tax Cut 2.0 is that virtually no credible source outside of these Republican politicians in Washington DC believes that the tax cuts are sustainable. Nor does we believe that the widening wealth gap crisis is good for the nation. (In fact, if you find any such source, please share it here). An internal Republican National Committee survey published by Bloomberg News shows that voters overwhelmingly think the new tax law benefits large corporations and the wealthy over the middle class. Yet we already see political propaganda published online like this one by Republican-only insider committees that are meant to garner political support for Tax Reform 2.0 but do not rely on independent facts and data. The major impact on me was to trigger a rhetorical question: “What were they thinking?” We are unlikely to hear that the Senate is considering passage of these bills.
The smart approach for taxpayers is to focus on current law; much of the 2017 tax law it is still not familiar. I strongly suggest that business and individual taxpayers analyze the impact of the Tax Cuts and Jobs Act as it exists now, with an eye on opportunities to minimize adverse impact. While less than 1 in 7 taxpayers nationally will see any adverse effect from this latest tax law change, more than 1 in 3 professionals and small business owners in this local geographic area will see a tax increase this year. This type of financial planning is efficient and effective. It starts with a technical analysis of your tax triggers and often end with thousands in savings after an investment of only a few hours. The sooner this type of planning is tacked, the greater the tax saving potential.