Republicans passed the first major overhaul to the United States tax code in over thirty years this month, with President Donald Trump saying the plan will “deliver more jobs, higher wages, and massive tax relief for American families and for American companies.”
The plan was pushed by Republican leaders after the GOP Congress wanted to deliver a major piece of legislation before the year’s end, and thus deliver Trump a legislative achievement in his first year, and to pass it while they still held a 52-48 majority in the Senate after they lost a seat as a result of the Alabama special election.
The new law reduces the corporate tax rate from 35% to 21%, moving the rate from among the highest in the developed world to more in line with the tax rates of other countries. In addition, it shaves off the tax rate across the board while keeping the seven tax brackets. These cuts to the individual tax rates, unlike the corporate tax rate cut, is temporary and will expire in 2025.
It also caps deductions for local and state taxes at $10,000, which can lead to higher taxes for those living in highly taxed states, such as New York, California, and Illinois.
The bill was unanimously opposed by Democrats in both houses of Congress and was opposed by a number of Republicans in the House who came from highly taxed states.
The new tax cuts are projected to add more than $1 trillion to the national debt over the next decade, accounting for lost revenues stemming from the lower rates but also possible increased revenue as businesses and individuals have more money to invest, thus increasing economic activity.
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