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Trump's Tax Cuts and Jobs Act

Updated on December 23, 2017
Ken Burgess profile image

Grew up on Cape Cod, Mass, Army Vet., Fmr. Director of Energy Conservation programs, RE Agent, current residence the Space Coast, FL

Trump announces the 'Tax Cuts and Jobs Act' being passed.

In the military we had an acronym KISS, which meant ‘Keep It Simple Stupid’. That’s what I want to do here, the simpler I keep it, the easier it is to understand how it works, the more technical I get, the easier it is to make good things seem bad, and bad things seem good.

The bill, called the Tax Cuts and Jobs Act, is heading to President Donald Trump's desk and in a matter of days will become law.

It’s the biggest and best deal that has happened for ‘Middle Class’ Americans in living memory, or as President Trump would say ‘its huge!’.

That’s not being hyperbolic or overstating the situation any, this is a massive deal that pulls the rug right out of some of America’s biggest foreign competitors for corporations that create jobs.

America was not competitive on the world stage, this will change

America will finally be competitive on the global stage, something it hasn’t been in over a generation, by cutting taxes on corporations from 35% to 21%.

Lets pretend you owned a multi-million dollar corporation whose profits were 70 million a year.

Lets say you have 1,000 workers in Mexico and the payroll is $250,000.

For 1,000 workers in America to do the same work it would cost $1,000,000 just for arguments sake. All benefits and worker's compensation and insurance included.

Well when America also had a higher tax rate (35%) this was a no brainer, you could save yourself a couple million in taxes and 3/4ths of a million in payroll by being in Mexico. After a few years, that adds up.

But now, with America being at 21%, the tax rate favors America enormously. To the tune of over 6 million dollars difference (based on your profits being 70 million a year).

KISS... being in Mexico made you an extra 3 million vs being in America.

But now being in Mexico will be costing you over 5 million a year in lost profits vs being in America.

Now of course there are all sorts of other considerations, you still wouldn't want to move to a state like California which has the worst taxes in the Nation across the board, but to move to a state like Florida (no state income tax, low property tax, low electricity costs) could be very profitable over remaining in Mexico once the new tax rate takes effect.

So in moving your business to Florida, you create a thousand new jobs for Americans, as well as pay corporate taxes to the nation. From the Fed's point of view, 21% tax is better than nothing, which is exactly what they got when the company was in Mexico.

How this impacts individual working Americans and families

The chart above is pretty self explanatory, families and single filers will pay less in taxes per year. Paying less taxes means you keep more of your money, simple as that.

The exception to this will be those who live in extreme liberal/progressive states, these states have long made a habit of burdening the working class with the hefty taxation for behemoth pension plans, backroom criminal payouts, and overly generous social programs that give freely to citizen and non-citizen alike.

States like California and New York were already oppressive in their taxation, but their citizen's were bailed out by the federal tax rebates (the rest of the nation's taxpayers) for their excess spending. This new tax law changes it so that the rest of the nation will no longer have to bail out their 'progressive' policies and politics by reimbursing state taxes... maybe that will make the voters in those states wake up, and vote in more fiscally responsible politicians.

Some other good news for families, the Child Tax Credit goes from $1,000 to $2,000. And It increases the income level from $110,000 to $400,000 for married tax filers who can benefit.

Those paying alimony will lose their deduction, but those receiving alimony will no longer be taxed on the income. This change begins in 2019 for only effects divorces signed in 2018.

It keeps deductions for property taxes, mortgage interest, state tax on new vehicle purchases and retirement savings. But interest on home equity lines of credit can no longer be deducted.

It doubles the standard deduction. A single filer's deduction increases from $6,350 to $12,000. The deduction for Married and Joint Filers increases from $12,700 to $24,000.

It allows parents to use 529 savings plans for tuition at private and religious K-12 schools. They can also use the funds for expenses for home-schooled students.

It allows a $500 credit for each non-child dependent. The credit helps families caring for elderly parents.

Yes there are some deductions that are going away, but for struggling Middle Class families not living in the excessive tax states (like NY and CA), this new tax deal will likely leave them with thousands of dollars more in their pocket.

You may hear a lot of talking heads on the news channels spouting off about how bad this new tax law will be, but in truth, this will be a major boost in the arm for the Middle Class Americans that have long been waiting for any type of relief from their government. A government that has decimated them over the past few decades with the likes of NAFTA, the repeal of Glass Steagall, and the non-affordable Affordable Care Act (Obamacare).


Hated by the EU, UN, and WTO means it is good for the USA.

Our Nation's progressive tax system that taxed income at a Federal & State marginal rate of over 50% during the Obama years was one of the main causes for our stagnated economy that long hovered around a mere 1% growth (under the most favorable of calculations).

More and more people dropped out of the workforce not for lack of drive or desire to be productive, but rather, it just wasn't worthwhile for them to work long hours every week and go through so much stress for the privilege of paying the government more than they could keep.

The majority of Americans no longer had even one week's salary worth of savings in the bank. Millions were being told they had to pay a penalty not to have insurance, the most vile 'non-tax' ever fostered upon Americans. All the while they were hearing about immigration welfare and visa worker programs that helped increase job competition and lower wages.

This new Tax goes a long way to beginning to turn things around for the long suffering Middle Class Americans. It goes a long way to making America competitive with other nations once more, and will help bring jobs back.

Its important this truth does not get lost. It is important for people to understand how the changes can only improve their opportunity to earn better income or find a better job. Its the best piece of legislation to come out of 'the swamp' in over two decades.

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    • bradmasterOCcal profile image

      Brad Masters 

      11 months ago from Orange County California BSIT BSL JD

      Ken

      Then if those are not the issues you are interested in then you want us to perpetuate the unequal distribution of Wealth caused by the Income Tax and specifically how the Internal Revenue Code allowed 540 billionaires, and 10.8 million millionaires in this country. They couldn't have done it without the Internal Revenue Code which can only really be accessed by the rich. So, making high marginal tax rates for the rich is not only unequal protection, but ineffective to get the rich to pay more taxes.

      The IRC allows them to bypass the taxes paid by the middle and lower class. And now in California we have one of the few remaining tax deductions taken away by this tax plan. We are singled out because CA has state income taxes, and very high state income taxes. How is this fair, or even reasonable.

      And why should the federal income tax take an important tax deduction and put its threshold at 10%. The rich and government employees don't care about medical deductions because they are not affected by medical expenses.

      ---

      UPDATE, Dec. 22, 2017: Among individual tax changes in the Tax Cuts and Jobs Act that was signed today into law is one that makes it easier to claim itemized medical deductions.

      Under the new tax law, for tax years 2017 and 2018 taxpayers no longer have to have medical expenses that exceed 10 percent of adjusted gross income (AGI). The threshold in these two years returns to the prior the 7.5 percent level. In 2019, the 10 percent of AGI rule returns.

    • Ken Burgess profile imageAUTHOR

      Ken Burgess 

      11 months ago from Florida

      Brad,

      You gave specifics, and I answered them as I chose to.

      The new tax law is better for the nation, and for working Americans, than the previous. That sums up my point(s).

      That you want certain things addressed from 30 years ago, that you feel the entire taxation system is unjust, those are not issues I am interested in addressing, nor the focus of my article.

    • bradmasterOCcal profile image

      Brad Masters 

      11 months ago from Orange County California BSIT BSL JD

      Ken

      Why are you dancing around the specifics that I gave you and going to generalities.

      I am just saying that this tax plan is no better than the 1986 Tax Reform Act.

      For example if the congress could move the med ded threshold from 7.5 to 10 why couldn't the 2017 congress move it down?

    • Ken Burgess profile imageAUTHOR

      Ken Burgess 

      11 months ago from Florida

      Brad,

      I believe you thought Trump would be a miracle worker, or perhaps you believe the 'establishment' and the trillion dollar corporations which control D.C. are easily swept aside with the stroke of Trump's pen.

      A long time ago, when there weren't international corporations and organizations like OPEC or more powerful economies to contend with (China) that could manipulate our politicians and our government we had a President stand up to the 'establishment' and openly and legally began the process of removing those controlling entities from within.

      He ended up dead in Dallas Texas.

      You want to focus on things that weren't caused by Trump, as if he could just walk in and change things on a whim, he can't, that he has done ANYTHING to change the course this nation was on, or benefit the American people in any way is a huge boon, we are talking moving mountains type of accomplishment in these times... if you don't recognize this you don't fully understand how corrupt the system is, and how determined the powers pulling the strings are that want to essentially enslave all Americans so that they have no more rights, and no more power over their lives than workers in China or Mexico.

      The Global initiative is not some benign effort to lift all of humanity up, it is an effort to control everyone and everything, and make the 99.8% nothing more than chattel, livestock, for the wants and needs of the .2%.

      Trump making any dent to deny those efforts at all, even if it likely is only to delay them until Americans foolishly vote in the next Obama type politician who is steadfastly against the Sovereignty of the Nation, as well as Individual rights and liberty, and is willing to serve the global agenda over American citizen interests, is still a good thing.

      There was, and is no better option available... there is Trump, or there was Clinton... Trump was the better option by far, and he has already made good on more promises than the last two Presidents combined did in 16 years.

      And a Merry Christmas to you as well.

    • bradmasterOCcal profile image

      Brad Masters 

      11 months ago from Orange County California BSIT BSL JD

      Ken

      You seemed to have only focused on my CA comment. And why should 4 million Trump voters in CA pay for what the democrat held state does.

      This again is a violation of the 14th amendment.

      You didn't comment on the medical deduction threshold which could have been changed but wasn't even on the table.

      Giving 2% COLA to SS doesn't offset the medical deduction high threshold. This is where Trump and the republicans could have helped the over 60 million retired people by helping them with their huge medical debts. 2% isn't going to cut it.

      COLA for SS should be tied to the COLA applied to government employees.

      You also didn 't comment on the 1986 Tax Reform Act which lost the middle class its only few deductions, and now Trump has taken away another one.

      What does it do for the middle class, very little.

      Once again, as long as we are tethered to Income for taxation, the wealthy will get wealthier.

      You can track the millionaires and billionaires and see how they used the Internal Revenue Code to dodge taxes. Higher marginal tax rates are not applied to the rich because they avoid the taxes.

      As far as the $4 billion in missiles he signed for is where the US spends most of its moneys. And keep Iran and N Korea on the threat of wars is how they get everyone on board with the huge defense budget.

      It appears that Trump has bitten the toxic fruit of the republicans and he is no longer outside the politician ring.

      Marry Christmas

    • Ken Burgess profile imageAUTHOR

      Ken Burgess 

      11 months ago from Florida

      Brad,

      In general you are correct, however you can't blame Trump for the corruption and abuse that caused the problems, that changed the tax system, before his arrival one year ago.

      ANY improvement in this for people is a bonus, and this does give relief to many people in rust belt states, in southern states, etc.

      As for those people in states like CA and NY, that you feel are being punished... if their states weren't corrupt, if they weren't so fiscally irresponsible, they and their states wouldn't be in such a situation. Yes, they do need to feel the pain of their state's corrupt and inept politicians and fiscal practices, that might rile them up enough to demand some fiscal responsibility.

      Democrat, Republican or Independent when they are stuck paying the bill, maybe they will make sure their politicians aren't 'progressive minded' individuals that have no concern for economics or taxation or how it effects the voters.

      Just because states like CA and NY are failed systems with failed policies, doesn't mean the rest of America should be dragged down with them spending trillions bailing them out.

      Its time for those states to drown in their own debt, that will force the people living in those states to wake up, and rid themselves of the politicians grinding their states into oblivion.

      Yes, there are only small benefits individuals, the biggest hope is that the corporate tax change, which makes it more feasible for companies to do business in America, a better option than Mexico or most nations in Europe, will help create more jobs, which in turn will help raise salaries, which in turn will stimulate the economy and continue the prosperity that has begun which we have not seen in more than a decade.

    • bradmasterOCcal profile image

      Brad Masters 

      11 months ago from Orange County California BSIT BSL JD

      Ken

      This is as bad a the Ronald Regan 1986 Tax Reform Act.

      That act traded lower taxes for a loss of the only real deductions available to the non rich. The rich are protected with the Internal Revenue Code and the Trump plan didn't do much to hurt them.

      The 1986 tax reform did lower the taxes for a few years, then the taxes went up but the lost deductions never came back.

      The same can be true of the Trump plan. And I like Trump but not this plan as it is to Republican.

      -------

      States like California and New York were already oppressive in their taxation, but their citizen's were bailed out by the federal tax rebates (the rest of the nation's taxpayers) for their excess spending. This new tax law changes it so that the rest of the nation will no longer have to bail out their 'progressive' policies and politics by reimbursing state taxes... maybe that will make the voters in those states wake up, and vote in more fiscally responsible politicians.

      Brad says----- This also hurts the non democrat voting people in CA. Trump had 4 million votes to Hillary's 7 million. Do you think this Trump tax plan is going to get him votes in 2020. Or even republican votes in 2018.

      This makes the republicans as much of a problem as are the democrats. How does that help the country?

      The Income Tax system is the worst system for generating taxes. It is not fair by definition. And consider that Bill Gates has $90 billion and there are 540 billionaires in the US and 10.8 million millionaires none of the previous presidents or congress in the last 100 years has stopped the rich from becoming richer. The inequality is all of the tax loopholes in the Internal Revenue Code almost all of it can only be used by the Rich.

      The good old colony days when we only had Doubled Taxation compared to today's Poly Taxes.

      A National Sales Tax would be fairer, it would totally replace the Income Tax and its Internal Revenue Code. It already has a history in the state sales tax.

      ---------------------------

      Some other good news for families, the Child Tax Credit goes from $1,000 to $2,000. And It increases the income level from $110,000 to $400,000 for married tax filers who can benefit.

      Brad Says--- How does that compare to the cost of raising children today?

      ----------------------------

      Those paying alimony will lose their deduction, but those receiving alimony will no longer be taxed on the income. This change begins in 2019 for only effects divorces signed in 2018.

      Brad says ----

      This is truly a sexist discrimination. Alimony is being paid from after tax money. And not allowing the person paying the alimony not to get a deduction is as ridiculous as not having the person receiving the alimony not to be taxed. So in essence only the person paying the alimony gets reduced after tax income. In the 21st century love in with Equality how is this equal?

      -------------------------

      It keeps deductions for property taxes, mortgage interest, state tax on new vehicle purchases and retirement savings. But interest on home equity lines of credit can no longer be deducted.

      Brad says ---

      Why are home equity lines of credit different? They both are tied to the mortgage, and failure to pay them can lose the home.

      ------------------------

      It allows a $500 credit for each non-child dependent. The credit helps families caring for elderly parents.

      Brad says----

      Once again that wouldn't even cover a week to care for elderly parents.

      In addition, their was no change made to the medical deduction threshold. In 2013 Congress increased this threshold from %7.5 to %10. Keeping this at %10 is a hardship because of the poor insurance coverage, and the increased cost of medical to the patient.

      This threshold should have been reduced instead of increased in 2013, as Obamacare was tauted to be better. It should be reduced to %2 if not %0. This is a major hit for the elderly and those on retirement.

      ---------------------------------------

      Yes there are some deductions that are going away, but for struggling Middle Class families not living in the excessive tax states (like NY and CA), this new tax deal will likely leave them with thousands of dollars more in their pocket.

      Brad says-----

      Once again this was a poor answer. This should not be punishment. States that don't have state income tax are not involved. This should be challenged as a violation of the 14th amendment. It clearly seeks to punish those states that didn't vote their EC for the republicans.

      ----------------------------

      You may hear a lot of talking heads on the news channels spouting off about how bad this new tax law will be, but in truth, this will be a major boost in the arm for the Middle Class Americans that have long been waiting for any type of relief from their government. A government that has decimated them over the past few decades with the likes of NAFTA, the repeal of Glass Steagall, and the non-affordable Affordable Care Act (Obamacare).

      Brad says-----

      As long as we base taxes on Income and have the IRS and the Internal Revenue Code the rich will become richer, and the Middle Class won't.

      It is one thing to give corporations a break from costly regulations and high taxes that will be passed on to the consumer. There is no reason to give preference in taxes to those rich people that don't earn a wage. Many of the billionaires make their fortunes with paying little to no taxes otherwise they couldn't double their billions in less than ten years. They hold their assets in stock and until they sell it there is no tax, and when they sell it the worse they pay is 20%, and there are methods in the IRC to allow them to put it in other devices, once again without paying taxes.

      ------

      The middle class needs the deductions that were taken away by the 1986 Tax Reform Act.

      I like Trump but he let us in the middle class down.

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