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On Friday, the GOP released the final details of their new tax plan, which will overhaul America’s tax code for the first time in decades. While standard deduction has nearly doubled, corporate taxes have been slashed from 35 percent to 21 percent. The changes are expected to increase the deficit to nearly $1.5 trillion. Politico reporter Aaron Lorenzo joins Hari Sreenivasan from Washington, D.C.
The delivery of the 1000 page plus GOP tax plan late yesterday marks an important step toward the first major legislative victory for the Trump administration. The final vote on the bill is expected next week before heading to the president's desk for signature. For some analysis of who won and who lost financially and politically I'm joined from Washington D.C. by political reporter Erin Lorenzo. Let's be optimistic – who fares better because of this tax plan?
I think a lot of taxpayers are going to feel ultimately that they're doing better at least for a while. Some of these individual tax cuts that they don't last – they expire after eight years in a lot of cases. But at least in the first couple of years, with the new tax bill there's going to be a much higher standard deduction and they're going to have a lower tax of less of their income is going to be taxable going forward. Again at least for these first few years.
So instead of trying to save all your receipts of charitable contributions and so forth you just get a higher bar that you automatically say to the government to deduct?
That's right. A lot fewer of us will itemize. Like you said, we won't have to save those receipts and tab everything up at the end of the year. And so the advocates of this bill think that there's a lot of upside to that.
OK let's talk a little bit about businesses. They've been a huge part of this conversation. There was a lot of discussion about lowering the corporate tax rate down. What was the end result?
So the end result is 21% for the corporate tax rate – that's down from 35% today.
Is that going to make a difference in all these companies who are keeping large hoards of cash offshore? Does it make America more competitive as they drive them to pull their business back into the United States?
That's certainly part of the design for this. A lot less business income will be taxable. And so the idea is to motivate those companies to do things here in the U.S. more. The lower corporate tax rate is paired with some changes on how international income is taxed and all of those things combined. The idea is to make US companies want to operate more in the U.S. And when they operate globally, do so more competitively.
There is also a lot of tension between states along the coast. New York, New Jersey, California and how they would be impacted negatively by this. So what ended up happening?
Those are areas where people particularly high income people might actually not come out ahead with the tax changes. When we talked earlier about itemizing, they are now going to have a ceiling or a cap on the big bucket items that they typically itemize. So your state and local taxes that that includes property taxes, income taxes that you pay at the state or local level that includes sales taxes too. So a combination of these things. Now there's a $10,000 ceiling on them.
One thing regardless of party stripes the people do agree on is that this is going to increase the deficit significantly.
Yes. There really is no official estimate or analysis that shows that this does not increase red ink. Earlier I mentioned to you that some of these provisions are temporary so if you operate on the assumption that they get extended or made permanent down the road there's a cost to that too and that also adds to that that deficit issue down the road. So the deficit as of this plan is $1.4 – $1.5 trillion. That's what the budget plan allowed for and they pretty much came right in at that level a little hair underneath it.
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