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Republicans are poised to work out their differences on the tax overhaul bill, a major piece of legislation that could affect work, health care, education, charity and other facets of American life. How does it affect you? We received an avalanche of questions from viewers, and Lisa Desjardins joins Judy Woodruff to answer some of them.
Now let's go back to the tax bill that is likely to be sent to the president's desk by Christmas.
Republicans are on the verge of working out their differences. It is a major piece of legislation that could affect work, business and many facets of American life.
Last week, we asked readers online for their questions. We received an avalanche. Over 800 people responded.
Our Lisa Desjardins is here to with some answers.
Lisa, thank you.
And that was your idea to ask people to send in…
Among others, yes.
To send in their questions.
So, before we talk about that, though, quickly, what is in this deal?
So, let's talk about what is happening today. We have some broad parameters only right now, that the corporate tax rate will probably land at about 21 percent from 35 now. We also understand that they will have a decrease in the top rate for the wealthiest Americans.
Other than that, Judy, to be honest, I think they have an outline, but they're checking the score, checking exactly how much this will cost, and making sure they have the votes. We don't have other details yet.
And you were telling me it's looking like next week?
That's right. They're hoping that — we're hoping to have details, maybe language this week. And a final vote in both chambers next week is the plan.
All right, so let's look at some of these questions.
As we said, hundreds of them came in. A lot of them have to do with small business. A number of people were concerned about what the changes in taxes that affect small business are going to mean.
And we got a very specific type of question that a lot of folks are wondering about. Here, let's listen to this one viewer.
Hi. My name is Sadhana Wray. And I live in Los Altos, California.
I work as a freelance technical editor. Currently, I can deduct my business-related expenses on my individual taxes.
And my question is, with the new tax plan, will I still be able to do this, or do I need to consider forming a corporation?
So, what she's talking about — we talked about the corporate rate that Republicans are mentioning, the 21 percent. This is different than that.
Republicans are also cutting tax rates for other types of smaller businesses known as pass-throughs. And what we're talking about here is the idea that, if you're a pass-through business, that you get a lower rate than if you're an individual filing the same way.
So, let's talk about what happens here. Should we all incorporate? Should I become Lisa Desjardins, LLC?
Well, first of all, they're put some limits in here. There are some businesses called personal services. They're white-collar businesses, like accountant, lawyers, architects. They will be blocked from doing this.
Second, let's talk about our writer, Sadhana. She could qualify for this technically, but she has to consider some things carefully. How much is she deducting now for her work-related expenses? Will she save more with a lower tax rate?
And here's an important part, Judy. How much does it cost to incorporate? It is not free, and you will probably have to hire an accountant. Overall, the experts I talk to, Judy, said this is one of the messiest parts of this tax bill.
They see one distinct winner here. That is accountants. It's so confusing, that they think many people will have to hire them to explain it next year.
Which is ironic, because the whole point of this — or much of the point of it — was to simplify the process of filing for taxes.
So, another popular question had to do with charities, with charitable deductions. What kind of questions there?
Let's go straight to another very popular question we got.
This is from Alice Mullaly of Central Point, Oregon.
My husband and I are retired. And we're fortunate enough to be able to make a number of charitable contributions, which we itemize on our current tax returns.
We also volunteer at our local Historical Society, which is dependent on the small- and medium-sized contributions from people like us.
So, my question has two parts. The first part is, what will be the effect of the tax bill on our income taxes, especially as it relates to charitable contributions? And the second is, what are the likely ramifications to charitable organizations like the Historical Society?
That's a great question.
First, the effect on her. The charitable deduction would remain in this bill. It was in both the House and Senate versions. However, Republicans are doubling the standard deduction. That's sort of the threshold level at which you would itemize or even begin to claim the charitable deduction.
So, it means fewer people will be claiming the charitable deduction. Something like 30 percent of people can do it now. That is forecast to go to 5 percent.
What does that mean for charities, her second question? There's a study out of Indiana University. They spent a long time looking at this. They estimate this will mean a drop of 2 percent to 5 percent for charities in how much they bring in.
For Alice's organization, the Southern Oregon Historical Society, I did the math. It looks like that would be about $17,000 less.
So, some bad news for some charitable organizations.
That's the expectation, but, again, this is untested.
All right, another set of questions, Lisa, were around Medicare, Social Security. We know this bill is about taxes, but Medicare and Social Security play into it.
This was one of the biggest categories.
Hi. I'm Beth Sheetz. And I live in Neenah, Wisconsin, with my 21-year-old son, who is disabled.
And my question is, with all the discussion about raising the deficit in order to facilitate the tax cuts, I would like to know what is going to happen to the programs like Social Security and Medicare and Medicaid.
I am the sole caregiver of Lloyd, my son. And he also gets SSI. And I get paid through the Medicaid waiver to take care of him. If anything happens to those programs, we will lose all of our income.
All right, so this — there's a lot in this question, obviously.
Let's start with Social Security. Social Security wouldn't be affected by this tax bill, because it gets income separately. However, Medicare could be affected. Because this bill's spending goes above a certain threshold, it could trigger automatic spending cuts in Medicare and some other mandatory programs.
But, Judy, Republicans say they plan to waive those cuts, to vote later to waive them. So it's a question of having to watch them.
One other thing that — actually, she didn't ask about this. Beth didn't ask. But there are other effects in this bill on people who are caregivers.
I spoke to the Caregivers Network today. And John Schall says he's worried because some of their tax deductions they get now are lower. For example, they get to take a head of household deduction. That is not there anymore.
The net effect really depends on your income and circumstance.
But no effect on Social Security disability payments directly?
That's correct, neither for Social Security for the aging population or for disability, no effect directly from this bill.
But, again, it's going to require people looking hard at what's in here.
So, finally, another set of questions around higher ed. You heard a lot of questions about that.
We have talked about this issue before, graduate students and the circumstance they're in. Let's go to this question from Texas.
I'm Andrew Leung from Austin, Texas.
I'm a graduate student in a STEM field. Currently, my department pays my tuition to the university and gives me a stipend in exchange for my teaching assistant responsibilities.
My question is, how much can I expect my taxes to increase and how will this affect higher education in general?
All right, we have some breaking news on this, actually.
I have one source — and we're also seeing others, Bloomberg, report that tonight, in this final emerging deal, that Republicans are jettisoning this idea of changing this provision, that they would actually keep intact graduate students' ability to waive their tuition without taxation.
That's good news for the graduate students. We have to see the final bill. But that is the direction that the Republicans are moving in right now, going away from the House bill, as it was.
So, potential big changes here at the last minute.
Just quickly, finally, Lisa, when would all this take effect?
That's one of our biggest questions we got.
And the answer is immediately. So, people need to pay attention very carefully. And when would it hit your paychecks if this is passed? Probably a few weeks, late into January. The American Payroll Association says they are having trouble figuring out how to make that happen, but this would all happen very fast.
Remarkable. Such a huge piece of legislation all turning really quickly.
Lisa Desjardins, thank you.
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