What the GOP's $1.5 trillion tax cut deal means

President Trump has touted the tax cut currently being shaped by his administration and Congress as the biggest in American history, but just how big it could be is — and will be — the subject of some heated debate. Now we have a number: Members of the Senate Budget Committee have reportedly struck a tentative deal for the budget resolution to allow about $1.5 trillion in tax cuts over the next decade.

That budget blueprint is a critical step toward enacting any tax cut or tax reform plan. And while the final size of the tax cuts may still change, the $1.5 trillion being considered is significant for several reasons:

1. It would add to the deficit — though just how much will be the subject of some debate and plenty of accounting games. Some Republicans, for example, argue that the increase in the deficit will be about half as big as the $1.5 trillion tax cut, once you factor in the resulting boost to economic growth and account for some tax cuts that would have likely been extended anyway. But it’s increasingly clear that Republicans have largely jettisoned the idea of fully paying for their tax plan in favor of getting as large a tax cut as they can.

The GOP shift was met with intense criticism from fiscal hawks. “This debt-dependent approach to tax reform flies in the face of the fiscal discipline so many members of the Budget Committee have voiced concern about in the past and violates pay-as-you-go principles and law,” Maya MacGuineas, president of the Committee for a Responsible Federal Budget, said in a statement Tuesday. “Moreover, the arguments being made to allow for $1.5 trillion of tax cuts – dynamic scoring and current policy adjustments – are disingenuous and at best can help explain a small fraction of this massive tax cut.”

Most tax-friendly states in America
See Gallery
Most tax-friendly states in America

10. Delaware

(DenisTangneyJr via Getty Images)

9. Mississippi

(SeanPavonePhoto via Getty Images)

8. South Dakota.

(Getty Images)

7. Alabama


6. Louisiana


5. Arizona

(Dreamframer via Getty Images)

4. Nevada

(ddub3429 via Getty Images)

3. Florida

(TraceRouda via Getty Images)

2. Alaska

(yenwen via Getty Images)

1. Wyoming

(Putt Sakdhnagool via Getty Images)


2. It would mean some tax cuts will likely only be temporary. For Republicans to be able to push ahead without Democratic votes, their plan can’t increase the deficit after 10 years. The budget blueprint may not meet that requirement without having some of the provisions sunset. Some Republicans have argued that the 10-year budget window could be extended to keep the tax cuts in place for longer.

3. It would likely mean Republicans still can’t get tax rates quite as low as they want. The 15 percent corporate rate President Trump wants, for example, would cost $2.4 trillion over a decade. And an analysis earlier this year of a plan consistent with President Trump's April outline found that revenue could fall be as much as $7.8 trillion over a decade.

4. It would help Republicans shrug off some — but not all — hard choices. “Calling for a tax cut in the budget would let Republicans lower tax rates while making fewer tough decisions on what tax breaks to eliminate to help pay for the cuts,” the Journal’s Richard Rubin and Siobhan Hughes write. Even so, the rate reductions in the plan could reduce federal revenue by significantly more than $2 trillion, meaning they’d have to close the gap by eliminating some loopholes and tax breaks.

Birth of a Child

The birth of a child is not just a blessed event; it's the beginning of a whole new set of tax breaks for your family. Learn how the newest addition to your family can help trim your tax bill, and how to save for your child's future in the most tax-efficient manner.

Read More

Brought to you by TurboTax.com

What is Form 8332: Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent

Having custody of your child usually means you can claim that child as a dependent on your taxes. But if you don't have to file a tax return, or you reach an agreement with your child's noncustodial parent, you can let them take the child as a dependent instead with Form 8332.

Read More

Brought to you by TurboTax.com

How Does Your Charitable Giving Measure Up?

Giving is truly better than receiving, especially when your generosity can provide income tax benefits.

Read More

Brought to you by TurboTax.com

Real Estate Tax Tips: Owning Property as a Tenancy in Common

"Tenancy in common" (or TIC) refers to a situation in which ownership of a piece of property is divided among multiple people. When the owners of a piece of real estate have a tenancy in common, it can create a number of complications related to taxes.

Read More

Brought to you by TurboTax.com
Read Full Story