After weeks of deliberation, Republicans in the House of Representatives unveiled a tax plan, known as the Tax Cuts and Jobs Act. The proposal reduces the number of tax brackets from seven to four. According to the Business Insider, federal income tax brackets would become 12% ($0-$45,000), 25% ($45,001-$200,000), 35% ($200,001-$500,000), and 39.6% ($500,001 and on) under the new tax plan.

Furthermore, the plan eliminates the state and local tax deduction (SALT). Previously, if a citizen earned $100,000, the federal government would tax the income remaining after state and local taxes. Under the new tax plan, however, the federal government would tax the original $100,000 because state and local taxes are no longer deducted. Taxpayers in high-tax states, such as California, New Jersey, and New York, would be particularly hard-hit.

The new tax plan cuts corporate taxes from 35% to 20% and implements a 25% pass-through tax rate for small businesses in order to increase investment and economic growth. Critics, however, denounce the proposal for creating an unclear line between “business income” and “labor income” and establishing a loophole for the wealthy. Neil Irwin of the New York Times explains that “If an accountant or lawyer operates a partnership, for example, that may be business income, yet it’s fundamentally a reward for the hours of labor each accountant or lawyer puts in. By taxing pass-throughs at a lower rate, the new plan creates tremendous incentive for any upper-income person to find a way to structure that income as pass-through-businesses income rather than wages.” Differentiating between the two would require interventions on part of the Internal Revenue Service.

Some people have also argued that the new tax plan harms the middle-class. Personal exemptions for medical expenses, college tuition, and relocating, would be eliminated. Only mortgages up to $500,000 instead of $1,000,000 would be deductible, and the real estate tax would be phased out in six years. Jennifer Huang ‘18 comments, “regardless of how much taxes are ‘reformed,’ nothing is going to change for the upper class. Nothing will ever really change until those who avoid taxes (the top 1%) actually pay their dues.”

Political opponents contend that the new tax plan would only benefit the top 1% because it decreases taxes for the wealthy. Kevin Tang ‘20 agrees: “While Trump claims to be a champion of the poor, this plan simply helps the elite.” Moreover, the Editorial Board of the New York Times claim that the Tax Cuts and Jobs Act would contribute $1.51 trillion to the federal debt in the next ten years. 35% of the benefits would be pocketed by foreign investors or executives. The Tax Policy Center also reports that “corporate tax cuts will cost nearly $7 trillion over the next two decades,” which decreases the federal government’s revenue.

On the other hand, supporters respond that tax cuts for the businesses would stimulate economic growth by encouraging investment and additional hiring. The Tax Cuts and Jobs Act has the full support of President Donald Trump and follows the A leader of the GOP, Kevin Brady, quoted Ronald Reagan, “‘I feel like we just played the World Series of Tax Reform and the American people won.’”

As the new tax proposal is further examined, the federal government will have to come to a hard decision. Will Congress adopt the Tax Cuts and Jobs Act or table it like the Republicans’ previous attempts to repeal Obamacare?