How Will the GOP Tax Plan Affect Americans? Tax Lawyer Rob Wood Explains What We Know So Far
Last week, the House of Representatives passed a lengthy tax bill that will go to the Senate for consideration. Some Senators already have a slightly different plan in mind, and a compromise will be required for any tax bill to pass during 2017. Just what the GOP plans would do has been the subject of disagreements. In this report, San Francisco tax lawyer Rob Wood explains what the House tax bill would do in its present form and what we don’t yet know about tax reform, should a bill actually go to the President.
Wood notes that the corporate tax rate would go down under every proposal that has surfaced so far. Whether a change in the corporate tax rate would affect every day Americans is not clear, and such a change might have no effect. The proposal is to reduce the current 35% rate to 20%. Whether the benefit to corporations would trickle down to benefit the general public is an ongoing political debate.
Another key change is a reduction in individual tax rates. There was a suggestion, Wood says, that everybody would get a rate reduction, but that will not happen. There has been a lot of talk about a 35% rate at the top, but that may not in fact be true. Wood suggests that taxpayers earning over a million dollars will not get a reduction. “I don’t think there’s a lot of crying over that.” Wood’s point is that the reduction will not be for every taxpayer.
Another change that has been widely discussed is that the federal income tax deduction for state and local taxes would be eliminated. That is an important change, Wood says, for people paying high taxes in states with high tax rates—New York and California are the two most cited instances. If this change goes through, it would be a big one, and it might cause some people to move away from states with high taxes.
Another big item, Wood says is the alternative minimum tax. It’s difficult to describe how the AMT works, “but any person who’s been paying AMT in the past knows that it’s sort of hard to eyeball.” Wood says that many people are affected by the tax, and the AMT has grown and had things added to it. Wood views the elimination of the AMT as a good thing for taxpayers.
Republicans speaking in favor of the tax proposals have said that the new tax law would “deliver more jobs, fairer taxes, and bigger paychecks.” Wood’s take: “That’s almost something for economists.” Wood does not have an opinion as to whether any of the tax proposals would produce all these results. President Trump has suggested that stimulating the economy and reducing high corporate tax rates would be a good thing for America, and that would probably be good for everybody. The hope is that corporations would be less inclined to take money and jobs offshore. But, Wood says, it’s hard to know if all this is true.
The claim has been made about the tax reform proposals that, for the first time ever, nine out of ten Americans will be able to file their tax returns on a form the size of a postcard. Wood’s comment: “I absolutely don’t get that one at all.” Wood does not feel that the tax proposals do the “whittling down” of the complexities in the law that would be required to make filing a tax return as simple as filling out a postcard.
Robert W. Wood is the Managing Partner of Wood LLP, San Francisco. Often listed among the best tax lawyers in America, Wood has broad experience in corporate, partnership and individual tax matters. Concerning the tax treatment of litigation settlements and judgments, he is perhaps the preeminent tax lawyer in the United States. He is also an authority on merger and acquisition tax matters, tax opinions, offshore account and entity disclosures, and many types of tax controversies. The Legal Broadcast Network is a featured network of Sequence Media Group.