We have been hearing a lot about tax reform lately and for the first time in nearly 27 years we could be seeing some major changes to the tax code. Here is a breakdown of the bills that passed each chamber of Congress and how these changes may effect the lives of older adults as well as how organizations like H.O.M.E. will serve them.
In Mid-November, the House of Representatives passed the Tax Cuts and Jobs Act by a 227-205 vote. Here are some provisions of that bill:
- The bill reduces the total number of tax brackets from 7 to 4.
- It eliminates some of the State and Local Tax Deductions but allows up to $10,000 to be deducted for property taxes.
- The bill will cut the corporate tax rate from 35% to 20% starting next year.
- The House bill doubles the Standard Deduction to $12,000 for an individual and $24,000 for a married couple filing jointly.
This past weekend the Senate passed its own the Tax Cuts and Jobs Act by a 51-49 vote. Here are some of its key provisions:
- The bill maintains the same 7 tiered tax bracket structure that we currently have but lowers the tax rates of the higher income brackets.
- It also doubles the Standard Deduction to $12,000 for an individual and $24,000 for a married joint filer.
- The bill will cut the corporate tax rate from 35% to 20% by 2019.
- The Senate bill calls for the changes made to the individual tax code to expire after 2025.
- It eliminates State and Local Tax Deductions.
- The Senate bill repeals the Affordable Care Acts individual mandate for purchasing health insurance.
So how will these changes affect older adults?
According to aging advocacy groups such as the National Council on Aging (NCOA) the impact of the proposed changes will be disastrous for older adults. NCOA has expressed concern over the impact that these proposed tax cuts would have on the nation’s deficit. With these proposed changes the deficit could increase by roughly $1.4 trillion, likely leading to major cuts to crucial social safety net programs down the line to make up for those costs.
Given the increased deficit, the passage of this bill will also require that budget sequestration rules be activated which will automatically trigger cuts to several programs as early as next year according to the Congressional Budget Office (CBO). One such cut could include a $25 billion cut to Medicaid which many older adults rely on.
There is also serious concern over the impact of the Senate provision repealing the individual mandate, which requires that people purchase health insurance. This kind of change could cause premiums to increase for older adults by $1,500 according to AARP. In addition to the higher premiums, 13 million American could loose health insurance.
Tax reform will also have an impact on the nonprofit sector. With the doubling of the standard deduction is it likely that less people will itemize their tax returns. According to the Local Council on Aging Organizations the number of taxpayers who itemize could drop from 30% to as low as 5%. This could reduce the overall amount of charitable giving by $15 billion, threatening the ability of nonprofit organizations who serve seniors to provide services.
So what can I do about this?
In Justice in Aging’s statement on the Senate Tax Bill, they “call on the House to halt this rushed process, and urge Congress to start over to ensure that any changes to the tax code will not drive up deficits or reduce access to health care for older adults, people with disabilities, and their families.”
Now that each chamber has passed a bill of their own, they meet in conference to iron out their differences and create a single piece of legislation. After that, each chamber votes on whether or not to approve the final bill before it goes to President Trump for his signature or veto.
If you are concerned about how this bill may affect you or a loved one, contact your representatives and share your concerns with them.
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