Last Thursday, President Donald Trump won a major victory as the House passed the new, controversial tax legislation, a central piece to the Republican plan to boost the U.S. economy. Under this new legislation, the Tax Cut and Jobs Act, the U.S. may see the largest rewrite of the tax code in decades, hence why the bill is under a tremendous amount of debate and scrutiny. The bill, also known as the Tax Cut and Jobs Act, was first introduced on November 2nd. Within just two weeks of its introduction, the bill was passed in a 227-205 vote in the House of Representatives, leaving little time for politicians to examine and discuss on the 440-page legislation that would affect every American household and business owner. The next step is for the Senate to pass its version, which is expected to happen next week in order to achieve President Trump’s goal of overhauling the tax code before the end of the year.

The House was able to pass its version of tax reform with absolutely no Democratic support. If the measure passes in the Senate, a small group of representatives from both the House and the Senate will work to reconcile the differences between the two versions of the bill. The final rendition of the bill will only allow members to vote either a “yes” or a “no.” The idea of tax cuts has always been popular, but critics of the bill fear the proposed changes to the tax system could destabilize the country’s economic growth and the current standard of living, particularly for the middle class.

In a statement by White House Press Secretary Sarah Huckabee Sanders, the Trump Administration stated, “We want all Americans to benefit by a growing economy and a tax system that actually works for our country versus one that penalizes people.” Sanders also hailed the House vote as, “big step forward fulfilling our promise to deliver historic tax cuts for the American people by the end of the year.”

The publicly stated goals of the Tax Cut and Jobs Act are to encourage investment and create jobs in the U.S., reducing the tax code’s complexity to put more money in the pockets of middle-class families. The bitter political divide over the policy lies in the belief, or rather disbelief, of whether the changes Republicans have proposed will accomplish what they claim. The bill outlines a $1.51 trillion plan to reduce taxes for corporations and for the middle-class, intending to help U.S. businesses compete in the world market place.

Republicans argue that the proposed tax cuts would be a catalyst for enormous economic growth, allowing both companies and individuals to have more money to spend and invest in the U.S. economy. In turn, the reduced revenue collected from proposed individual and corporate tax cuts would spur expansion and job creation. Opponents of the proposed tax cuts fear that the bill’s vague language and incomplete safeguards could provide businesses and wealthy investors with opportunities to avoid paying taxes. They also argue that there is little historical evidence linking tax cuts to sustained growth. In fact, most economists claim that tax cuts financed by deficits have the potential to undermine growth rather than encourage it.

In the flood of ever-changing bureaucratic developments, amendments, and analyses, it is difficult to determine the current state of the bill.  Most voters are primarily concerned with the effects the legislation will have on their individual income taxes. While many individuals across income brackets stand to benefit from the tax system overhaul, not everyone would. According to estimates by the Joint Committee on Taxation, about 13 million middle-class families would end up paying more in taxes. The House’s bill would reduce the current seven bracket system to four, while the Senate’s bill would retain the seven brackets with reduced marginal tax rates. The House bill would also double the amount for standard deductions while eliminating personal deductions for claiming dependents. Another one of the main proposals would effectively eliminate the individual health-care mandate, potentially saving the government more than $300 billion over a decade but possibly also leaving in as many as 13 million Americans without coverage.

While these changes seem substantial, the largest changes will be on corporate tax policy. 95 percent of U.S. businesses are not set up as corporations but as partnerships and proprietorships, also known as “pass-through” entities. The Tax Cut and Jobs Act would provide tax cuts to these businesses, where the income is passed along to their owners and then taxed under the individual income tax system. The top corporate rate would also be slashed from 35 percent to 20. The goal being to help U.S. corporations better compete with foreign rivals with lower tax rates. However, the bill is looking to do more than simply discourage homegrown businesses from leaving the U.S. It also aims to transform the way global profits are taxed by fencing off the money earned by multinationals outside the U.S.

Ultimately, the fate of the U.S. tax system will reveal itself over the coming weeks as the Trump Administration strives to meet its goal of overhauling the tax code in time for 2018. While the White House and congressional leaders were responsible for releasing a framework for the tax changes, most of the key details will be left to tax committees. Sources: https://www.nytimes.com/interactive/2017/business/economy/tax-reform-bill.html https://www.usatoday.com/story/news/politics/2017/11/16/house-poised-vote-tax-overhaul-bigger-battle-lies-ahead/869171001/ https://www.washingtonpost.com/news/wonk/wp/2017/11/16/the-house-is-voting-on-its-tax-bill-thursday-heres-what-is-in-it/ https://www.shrm.org/ResourcesAndTools/hr-topics/benefits/Pages/Senate-Tax-Bill-Altered-to-Kill-the-ACAs-Individual-Mandate.aspx