Republicans move to pass Tax Bill 2.0 before mid-terms
Republicans in the US House of Representatives have proposed more deficit-expanding tax cuts in a bid to garner votes before the mid-term elections on 6 November 2018
12 Sep 2018
Despite a low likelihood that any measures passed would become law, it is calculated to put the Democrats in opposition to tax cuts affecting US workers and reduce the likelihood of the Republicans losing control of Congress.
Under ‘tax reform 2.0’, the Republicans are proposing to eliminate the maximum age for some retirement account contributions and to let new businesses write off a larger number of start-up costs. It seeks to incentivise tax savings by creating a ‘universal savings account’ for families that would allow tax-free earnings to be more easily withdrawn than is currently the case with retirement accounts. It also opens up tax-free 529 college savings accounts to be used to pay for apprenticeship costs, student debt and home-schooling expenses.
Workers would be able to access retirement savings, without incurring tax penalties, in order to cover the expenses from the birth of a child or an adoption.
The Bill would also allow the holders of a 401(k) who have an annuity in a similar plan to transfer the contract to an individual retirement account without incurring tax, and eliminate the minimum distributions requirements individuals age 70 or older must take from 401(k)-style accounts, providing they already have a cumulative balance of up to $50,000 (£38,424) in their retirement accounts.
The proposals include making the federal individual income tax cuts, approved on a temporary basis in December 2017 by the Republican-controlled Congress and President Trump, a permanent fixture of the legislature.
These cuts seek to cement the $1.5 trillion tax cut enacted into law in 2017, which permanently lowered the corporate tax rate from 35% to 21%. The Republicans view the tax cuts as providing a growth spurt which has boosted employment, but the Democrats have consistently argued that the tax cuts benefit the wealthy and add to the federal budget deficit.
The individual tax rates introduced in 2017 were scheduled to expire after eight years in order for the Republicans to meet a restriction which mandated that the laws could not increase budget deficits beyond 2027. This marked a policy departure for the Republican party, which has historically been associated with fiscal conservativism and reducing the deficit.
Report by James Bunney