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2017 has seen a number of different tax reform proposals, most significantly a revision of the current tax brackets and modification of various deductions, depending on the state where you live. Now, the Senate has passed a bill to drastically reform federal taxes.
While it still has to be approved by the House of Representatives before it goes through, the bill holds massive potential to benefit businesses. While the proposed tax bill drew strong, controversial reactions from Democrats, there is no doubt that it would help increase businesses growth and success.
Here’s how it could affect your next tax season if it passes.
Business Tax Changes
It’s no secret that Obama era tax reform did nothing to help businesses. The market in general did not like what liberals did to the economy, but luckily the tide is going from bleak to bright thanks to this proposed tax bill.
According to Business Insider, these are the three major changes in regards to business approved by the Senate:
- Decrease in the corporate tax rate, from 35 percent to 20 percent.
- Pass-through businesses, like limited liability or S-corporations, will be able to deduct 23 percent of their income.
- Ability to write off your business expenses as soon as you make them until 2022. Before the bill, the limit was at 50 percent, and after 2022 the percentage will decrease for five years.
Individual Tax Changes
Business Insider also reports on the changes that would affect individual taxes:
- Remove penalty for businesses that don’t offer insurance under the Affordable Care Act.
- Double the Child Tax credit from $1,000 to $2,000.
- Increase the minimum level to qualify for alternative tax minimum.
- Change the rate of inflation adjustment to the chained consumer price index.
- Lower the requirement for medical expense deduction during 2018; if your medical expenses add up to 7.5 percent of your income, you will be able to deduct the rest — down from 10 percent.
Tax Reform to Make America Great Again
The current tax bill has come a long way from the original proposal in 2016; tax experts at Villanova University originally speculated that the proposed tax reform would be difficult to pass as it was, especially as would result in a loss of $4.1 trillion. In the previously mentioned Business Insider article , they report that as it stands currently, the revised bill in question lessens the burden from individuals and businesses in many ways, but the loss in federal revenue would still amount to over a trillion dollars in the next several years.
With tax breaks for both businesses and low-income individuals, the tax bill stands to benefit many Americans across the country, but not all are in favor of it. In Colorado, the tax proposal has been received with great controversy, with senators starkly divided. According to The Coloradoan, some like that it favors the middle class, while others think it “betrays working Coloradans.”
With taxes, there are many factors to consider — not just mathematically but also economically. Politicians must decide what is best for the country, choosing between progressive, regressive, and proportional taxes. There is no way to make everyone happy, but the goal is always to help America become as great as it can be.