GOP Strongly Backs Tax Reform

By Seth M. Gainsburg ‘19The House of Representatives released The Tax Cuts and Jobs Act. The Act, the largest transformation in US tax code in 30 years, will focus on reducing corporate tax rates and consolidating the progressive income tax system. Given the turmoil in the GOP stemming back to President Trump’s election, the announcement was surprisingly well-supported by the party.The GOP has been highly divided in the past months, so a unified backing from the party was unexpected; however, tax reform has been on the GOP’s docket for a number of years. This Act, they hope, will serve to decrease government spending while lowering taxes on both business and individuals (with the exception of the top bracket, which will have the minimum raised to $1 million from $470,700 for jointly filing married couples). Perhaps most significant will be the Act’s impact on business: the corporate tax rate of 35% will be reduced to 20%, bringing it down by over 40% from its current rate. As markets continue to perform well above par, the Act will definitively receive strong backing from Wall Street.The Act will affect other areas of the tax code: while the capital gains and dividend rate will remain unchanged, estate taxes are being altered. Under the proposition, the rate per person for estates over $11.2 million will remain at 40% (a rise in the minimum from $5.49 million) until 2024 when the rate will drop to zero. Yet, there are a number of compromises visible in the Act as support from the opposing party was, and will continue to be, quite powerful.However, the Act covers a wide range of Republican goals, ranging from increases in deductions, lowering corporate tax rates, and eliminating numerous credits to relaxing moving expense and employee recognition award taxes. Compared to existing policy, the Act reflects both President Trump’s and the GOP’s age-old desire to overhaul the American tax system to a place they believe to be proper.It is yet to be seen whether or not the Act will pass given the small Republican margins in both the House as well as the level of proposed change. Thus, expectations for the Act in its current form to pass are not extremely high, yet some level of reform likely will occur.