The House Just Passed a Budget Bill That Could Significantly Affect Your Taxes

budget bill

The House of Representatives passed a budget bill yesterday, paving the way for President Donald Trump to fast-track tax reform before the end of the year.

The tax plan, which will be revealed next week, could have a major impact on the lives of many Americans.

Why does the budget bill matter?

The budget bill passed with vote of 216 to 212, which included nays from 20 Republicans.

Some of those Republicans want to protect a state and local tax deduction known as SALT. Others oppose the $1.5 trillion the bill is predicted to add to the deficit.

No Democrats voted for the bill.

“Budgets are a reflection of values, and the budget that passed the House today shows that the Republican Party values nothing but trillions in tax cuts for their wealthy donors,” Senator Elizabeth Warren (D-Mass.) said in a statement.

“This budget will make life worse for millions of Americans — but it’s sure to earn Republicans an extra glass of champagne at their next corporate fundraiser,” she continued.

Notably, the passage of the bill also triggered “reconciliation” — a period during which the Senate can pass legislation with a simple majority rather than the 60-vote supermajority it typically needs to overcome a Democratic filibuster.

Reconciliation is seen as vital to passing Trump’s tax plan before the end of the year.

“By passing this budget today, House Republicans just provided the legislative runway for pro-growth tax reform,” Ways and Means House Chairman Kevin Brady (R-Texas) said in a statement.

“Our successful vote will allow us to move forward quickly on delivering the first overhaul of America’s tax code in more than three decades,” he continued.

The details of the tax reform plan, which Brady promised would “deliver more jobs, fairer taxes, and bigger paychecks,” will be introduced November 1.

How the budget bill could affect you

Until the committee releases its tax reform plan in full, it’s impossible to know exactly what this budget bill could mean for you.

But based on a framework Trump revealed in a September speech, major tax changes might include a near-doubling of the standard deduction for single taxpayers to $12,000 as well as the following:

Repeals of:

  • The SALT deduction, a tax break 30 percent of taxpayers use
  • Most itemized deductions, aside from mortgage interest and charitable contributions
  • The estate tax and alternative minimum tax, which are mostly paid by the rich

And reductions of:

  • Tax brackets from seven to three (possibly four), with rates of 12, 25, and 35 percent
  • The corporate tax rate, from 35 to 20 percent
  • The pretax amount you can contribute to 401(k) plans (although Trump has opposed this idea on Twitter)

According to experts, these changes would mostly benefit the wealthy.

Here are more details on how Trump’s tax plan could affect you. You also can visit MarketWatch for a Trump tax calculator, but be aware it’s based entirely on speculation right now.

If, as Republicans hope, tax reform passes in December, the changes will apply to your 2017 taxes.

Regardless of what happens, the best way to prepare is to continue making smart financial decisions, such as contributing to your 401(k) and padding your emergency fund.

And if you disagree with any part of the budget bill — or the proposed tax reform policies — contact your representatives.

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Published in News, Taxes