The Tax Reform Cheat-Sheet
It ain’t sexy, but that’s on purpose: taxes are more important than most laws. Here’s a cheat sheet to help you understand what’s happening.
Guys, this is of dire importance, and it’s boring as all hell. But that is on purpose. The more bored you are of taxes, the more they will affect your life. That’s because instead of passing laws to fund things, which is hard, we sneak money to people and programs in the form of tax deductions. The sort of deductions only those with good accountants can find. That’s why, in theory, simplifying the tax code is such a great idea. But is it really simple? Only if you know what’s going on…
Alternative Minimum Tax: Trying to weasel your way out of your taxes by chaining 6 highly-paid accountants to your desk and forcing them to look for every 2-cent deduction? This baseline tax amount prevents rich people from doing just that. Well, it did: it’s being cut faster than Matt Lauer from your grandmother’s scrapbooks. It is, however, still included in the Senate Plan after last-minute renegotiations.
Child Tax Credit: Wanna save on taxes? Get a kid. This doubles your deduction from $1,000 to $2,000 per kid (or $1,650, depending on the plan), while phasing out for super-high-earners. It was championed by Ivanka Trump and Marco Rubio, so don’t be alarmed if Trump nixes it out of not-giving-a-shit-what-she-thinks or pure spite. That’s because it currently expires in eight years. Not a single corporate tax cut is set to expire.
Chained CPI (or, how to secretly screw you): This one’s a doozy. Basically, the plan redefines how we measure inflation in taxes, making it look like you make more money than you really do. Sounds harmless, right? Except if you “make” more money, you get taxed a higher amount, even though it only appears as if you made more. This drives middle-class families into higher tax brackets without actually giving them more money. Oh yeah — you also get less from social security as a result. Weeeeeeeee accounting is fun!
Conference Committee: Now that the Senate and House have passed two different tax bills, they need to merge them into one bill that they both can pass. If the bill dies at all, it dies here: the next step is Trump’s desk. Technically a conference committee must contain delegates from both parties, but this bill was written in rushed secrecy, and there is no reason to think the Mitch “Tortoise with a Purpose” McConnell and Paul “Pre-Pubescent Jackrabbit” Ryan will stop now.
Deficit, National: Much like any young American who went to college (and will be punished for it), our country is in debt. A lotta debt — roughly $20,000,000,000,000. The deficit is how much we add to that debt every year. Obama cut it by two-thirds. The GOP, party of fiscal responsibility, wants to bring the debt to the drinking age. Why does it matter? Because being in debt makes it real hard to deal with another financial crisis.
Deficit Hawk: A politician who refuses to let the government spend more than it makes. Once thriving in the senate, this spineless species goes into hibernation as soon as the President is no longer black.
Educational Deductions: You know who makes too much money: teachers and students! That’s what I always say. So the GOP Reform cuts those apple-fattened piggies off in three key ways:
1. You can no longer deduct student loan interest payments from your taxes. In debt for getting an education? Who’s smart now, egghead? (Note: this is currently only in the House’s plan, not the Senate’s).
2. Grad students get free or reduced tuition for teaching classes — money which they never actually receive. It simply cuts their tuition. The GOP plan makes those students pay taxes on that “income” anyway.
3. Teachers can no longer deduct the cost of buying classroom supplies. Get used to those pencil nubbins, children, cause you ain’t getting new ones.
Estate Tax: If you die, and you’re worth a godless, Scrooge-McDuck amount of money, you can’t just give it all to Huey, Dewey, and Louie off the top — multi-million dollar estates are taxed before their heirs get it. Framed as a “death tax” but Republicans looking to slash it, the estate tax only applies to .02% of Americans. Seeing as we rebelled against this sort of permanent, aristocratic family class once before, you’d think them Tea Partiers would be less happy to see this one go.
Great Depression, The: An enormous financial collapse preceded by massive income inequality (check), a severe recession (check), and lowering the corporate tax rate to 25%. The GOP plan currently lowers it to 20% (check!). Best get in your bread line now before all the good loafs are taken!
Individual Mandate: By removing the penalties of not buying insurance, the government saves $300 billion it would pay in insurance subsidies. It also takes 13 million people off of insurance and drives premiums up for everyone else, a major reason why they couldn’t repeal the ACA the first time around.
Pass-Through Businesses: Businesses that form as partnerships, most often consultants, lawyers, and (shocker) lobbyists. Pass-throughs can declare business income as personal income, receiving a substantially lower tax rate on earnings. Why do this? Maybe it is because Donald J. Trump own 500 pass-through entities.
Standard Deduction: Don’t feel like looking for all the specific deductions (or can’t afford an accountant to do so)? This lets you straight-up deduct a standard amount, and this plan currently double it. That’s good news! Except that, with the middle-class expiration and inflation hooey explained above, it only saves us non-millionares money in the very short term, if at all. Many people can deduct more than the standard deduction (for example, those with student loans), meaning this may be useless for you.
State and Local Tax Deductions: When you pay state or local taxes, you can deduct that income from your federal taxes. Duh — it’s not actual income, you shouldn’t be taxed on it. Repealing it especially hurts people in high-tax states or cities like California and NYC. Of course, state taxes pay for state services, and federal taxes for federal services. But California pays more in taxes than it receives. Removing it is a form of double taxation (though it is up for debate). One of those things we threw a bunch of tea in a harbor for.
Work Opportunity Tax Credit: Simply put, you get a tax break for hiring disabled veterans or the long-term unemployed. Ditto hiring people with autism and other disabilities. Cutting tax breaks that benefit disabled veterans? You can just hear Steve “The Chinless Wonder” Mnuchin and his definitely-not-a-mythological-harpy wife licking their beaks in anticipation.
Nick Geisler is a writer, filmmaker, and multimedia artist currently in Los Angeles. You can check out my work and offer to fund my next blockbuster at https://www.nickgeisler.com
