‘MAGA Accounts’ and No Tax on Tips: Republicans Plan to Inject Trump Into Tax Code
House Republicans have proposed a comprehensive tax bill aimed at implementing several of President Trump's campaign promises, including not taxing tips, overtime pay, and creating 'MAGA accounts' for children. This legislation seeks to temporarily extend elements from Trump's 2017 tax law, such as lower income tax rates and a larger standard deduction, while introducing new tax cuts and exemptions. The bill also proposes tax increases to offset costs, targeting areas like clean energy subsidies, university endowments, and remittances sent overseas. However, the proposal faces opposition from within the Republican Party due to disagreements on specifics like the state and local tax deduction cap. The legislation is expected to add $2.5 trillion to the national deficit over the next decade, as it attempts to balance tax cuts with increased spending on military and immigration enforcement.
Context:
House Republicans have proposed a comprehensive tax bill aimed at implementing several of President Trump's campaign promises, including not taxing tips, overtime pay, and creating 'MAGA accounts' for children. This legislation seeks to temporarily extend elements from Trump's 2017 tax law, such as lower income tax rates and a larger standard deduction, while introducing new tax cuts and exemptions. The bill also proposes tax increases to offset costs, targeting areas like clean energy subsidies, university endowments, and remittances sent overseas. However, the proposal faces opposition from within the Republican Party due to disagreements on specifics like the state and local tax deduction cap. The legislation is expected to add $2.5 trillion to the national deficit over the next decade, as it attempts to balance tax cuts with increased spending on military and immigration enforcement.
Dive Deeper:
The proposed tax bill includes temporary enactments of Trump's campaign pledges, such as eliminating taxes on tips and overtime pay, and introducing tax-advantaged 'MAGA accounts' for children's investments. However, these are subject to income limits and other restrictions.
Republicans aim to extend key provisions from the 2017 tax law, including lower marginal income tax rates and a larger standard deduction, to avoid tax increases for most Americans as these measures are set to expire at the end of the year.
To fund these tax cuts, the bill plans to increase taxes on certain areas, including rolling back clean energy subsidies, increasing tax rates on university endowments, and imposing a new 5% tax on remittances sent overseas, affecting migrants but not American citizens.
Business tax breaks in the bill allow immediate write-offs for research and development, and investments in equipment and machinery, with a focus on encouraging domestic manufacturing. The bill also makes previous 'pass-through' business deductions more generous and permanent.
There is internal opposition within the Republican Party regarding the proposed $30,000 cap on state and local tax deductions, with some members from high-tax states like New York finding it insufficient.
The legislation is projected to significantly increase the national deficit by at least $2.5 trillion over the next ten years, as it incorporates both tax cuts and spending increases, particularly in military and immigration enforcement.
Not all of Trump's campaign proposals are included in the bill, such as changes to taxation for Americans overseas, which have not been adopted in the current draft.