|House GOP Releases Comprehensive Tax Reform Proposal
Issue: Tax Reform
Date: November 3, 2017
Action Taken: On November 2nd, House Ways & Means Committee Chairman Kevin Brady (R-TX) released the House Republicans’ comprehensive tax reform proposal, the “Tax Cuts and Jobs Act” (H.R. 1).
Background: Republicans have promised to pass comprehensive tax reform, and have taken the first step with the introduction of H.R. 1. Claiming this is a “bold, pro-growth bill” to “overhaul our nation’s tax code”, House Republicans hope to have a version of this bill signed into law by President Trump before the end of the year.
The House bill lowers the corporate tax rate from 35% to 20%, establishes four tax brackets for individuals, starting with income of $24,000/married; $12,000/single; $18,000/head of household (income below those amounts would not be taxed at all; eliminates the personal exemption but almost doubles the standard deduction from $6,350 to $12,000 for an individual; and eliminates the deduction for state and local taxes. Importantly, it does not change the current tax treatment of contributions to 401(k)-type retirement savings plans but does significantly change the tax rules for insurance companies.
Other provisions in the bill include repeal of the deduction for unreimbursed medical expenses and the “Pease” rule that limits the value of deductions taken by high-income taxpayers. Also in the bill is a provision that more than cuts in half the deduction for mortgage interest (only interest on new mortgages of up to $500,000 would be deductible, and only for principal residences and not for home equity loans). The bill does not change current law capital gains tax rules, or most charitable giving rules. Many deductions are repealed, including tax preparation fees, entertainment/meal deductions, alimony, and moving expenses.
We are still analyzing the many insurance-related provisions to determine the impact on advisors and their clients striving to manage financial risks and achieve financial security. Below is a summary of some of the insurance provisions:
For a more detailed preliminary analysis of the bill, click here for the memo from NAIFA’s counsel.
Next Steps: On November 6, the House Ways & Means Committee will begin marking up H.R.1. The mark-up is expected to last at least four days. House leadership hopes to bring the bill to the floor for a vote the week of November 13. The Senate is expected to release its version of tax reform after the House completes it work.
NAIFA, in concert with other industry leaders, continues to review the impact of various provisions to develop a comprehensive response and unified message.
On November 7-8, select NAIFA members will participate in the Secure Family fly-in targeting a small number of Representatives and Senators with influence over the tax reform discussion.
NAIFA members utilizing Main street messaging have been influential on retirement savings and workplace benefits. Once we begin messaging on the bill, we will want to make sure the bad tax ideas that have already been largely set aside (such as new taxes on life insurance policies, annuities, health insurance, retirement savings plans, most workplace benefits) remain set aside.
NAIFA is committed to continuing as a constructive participant in the legislative process to advance tax reform. Watch for additional information on how you can help to ensure that as a whole tax reform encourages Americans to plan for financial and retirement security for themselves, their families and their employees.