Question

After reading "Considering the Impact of the Tax Cuts and Job Bill" and "Preliminary Analysis of the Tax Cuts and Job Act" choose three to four of the following questions/prompts and respond accordingly:

1. Summarize the provisions of the tax bill and offer an analysis of the benefits to individuals and businesses.
2. What do you anticipate will be the positive and negative effects of the reduction of taxes on the repatriation of foreign earnings for U.S. domestic companies?
3. Do you support or oppose the bill? Why?

Note: I know it might be tricky but any generic thoughts would be great! Thanks!

Answer 1

1.A. Provisions of Tax Bill and its analysis.

The new tax law makes substantial changes to the rates and bases of both the individual and corporate income taxes. Important Provisions and benefits are as follows,

INDIVIDUALS

a. The Act reduces marginal statutory rates at almost all levels of taxable income.The top marginal rate falls from 39.6 to 37 percent.The remaining rates were 10,12,22,24,32and 35 percentrespctively.

b. The Individual Alternate Mininmum tax exemption inceases to $70300(single) and $109400(joint),Phases out above $500000(single) and $1000000(joint).

c. The standard deduction amount increased to $12000(single) and $24000(joint) and $18000(head of provisions).These amounts and indexed for inflation.

d. The personal and dependant exemptions repealed.

e.The Child tax credit increased to $2000per qualifying child under 17,and $500 for other dedpendant child.Phases out begining at$400000 for joint filers.Refundable portion equals 15% of earnings in excess of $2500 upto $1400 per qualifying child.Maximium portion are indexed for inflation.

e.The real estate ,personal property and either income or sales tax up to $10000(single and joint filers) are deductible.

f.The mortgage interest payments on up to $750000of new acquisition debts are deductible.

g. Out of pocket medical expenses in excess of 7.5%of AGI(adjusted gross income) are deductible.

h.Itemized deduction were repealed.

i.The Act changes the measure used for inflation indexing.Chain weighted Consumer Price Index(C-CPI) is used.

j.The estate tax also changed.Top rate of 40% on Estates above $11.2million, $22.4 million(couples).It also indexed for inflation.

i.The ACA(Affordable Care Act) Individual Mandate penalty sets to zero.

BUSINESS

a. It cuts the maximum corporate income tax to 21 percent.(from 35%).

b. The Corporate Alternate minimum tax repealed.

c.Income from Pass through business also changed.It provides 20% deduction.

d.The new Investment purchased deduction also changed.100% bonus depreciation is allowed for qualified property.

e. The business interest deduction dissallowed for net interest in excess of 30% of business income.

f.In case of US mutilnational companies,modified territorial system with base erosion provisions.Anti -abuse tax on certain payments on certain payments to foreign corporations.One time tax on unrepartiated foreign earnings at 8%.(15.5% for liquid assets.)

2.Positive and negative effects of repartiated provisons of this Act

Positive effects.

a.It allows firms to bring back funds previously accrued in foreign operations, without incurring any additional tax liabilties.

b.It boosts domestic investment .It also allows domestic capital investment.

Negative effects

a. It will reduce economic growth.

b. It will not incease job opputunities.

3.My Opinion of Bill

As an Individual ,I agree with the bill, because it gives more relaxations and benefits on my tax .It will reduce my tax liabilty and hence tax burden will get reduced.