Final Paper: The Tax Cut And Jobs Act 2017 Changes

Final Paperthe Tax Cut And Jobs Act 2017the Changes Made By The Tax C

Final Paper the Tax Cut and Jobs Act, 2017 The changes made by the Tax Cut and Jobs Act, 2017 to the tax provisions have changed tax rate for 2018 and people are getting a first hand experience of what it means to them. Go over the Act and address the questions below: What are the major changes made to the tax provisions by the Act? What impact is it likely to have on our GDP and government’s budget? How have the changes in taxes affected you personally? Does everyone benefit from the changes in tax provisions or does it favor one group over others? What changes do you agree and disagree with? If you had the power to revise the Act, what changes would you make? Many articles have been written analyzing the Tax Cut and Jobs Act, 2017. Infuse these expert opinions with your own. The final report should be submitted in APA format, and should be close to 7 pages.

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Final Paperthe Tax Cut And Jobs Act 2017the Changes Made By The Tax C

Final Paperthe Tax Cut And Jobs Act 2017the Changes Made By The Tax C

The Tax Cuts and Jobs Act (TCJA) of 2017 represented one of the most significant overhauls of the United States tax system in decades. Signed into law by President Donald Trump on December 22, 2017, the legislation aimed to stimulate economic growth, simplify the tax code, and provide tax relief to individuals and corporations. This paper critically examines the major changes introduced by the TCJA, analyzes its projected impacts on GDP and the federal budget, discusses personal effects, and evaluates whether the benefits of the Act are equitably distributed among different groups. Finally, it offers suggestions for revising the Act to enhance its fairness and efficacy.

Major Changes in the Tax Provisions of the TCJA

The 2017 Tax Cuts and Jobs Act introduced numerous alterations across individual, corporate, and international tax codes. Among the most impactful are the significant reduction in corporate tax rates from 35% to 21%, the overhaul of individual income tax brackets, elimination of numerous deductions, and the increase in the standard deduction. The corporate rate cut was aimed at making U.S. businesses more competitive globally and stimulating economic investment. For individuals, the standard deduction was nearly doubled, reducing taxable income for many filers, though some itemized deductions were curtailed or eliminated, such as miscellaneous itemized deductions, personal exemptions, and state and local tax (SALT) deductions capped at $10,000.

Another noteworthy change was the transition to a territorial tax system for multinational corporations. This aimed to encourage repatriation of overseas profits. Additionally, the TCJA temporarily reduced the corporate tax rate, while many individual tax provisions are set to expire after 2025, indicating potential future legislative revisions. The Act also introduced new provisions for pass-through entities and altered estate tax thresholds, potentially affecting wealth transfer and business structures.

Projected Impact on GDP and Government Budget

Economists are divided regarding the long-term impacts of the TCJA on the U.S. economy. Proponents argue that the tax cuts will boost economic growth by encouraging investment, increasing employment, and raising wages. Some studies projected a short-term increase in GDP growth rates, potentially adding 0.2 to 0.5 percentage points annually over several years (Congressional Budget Office, 2018). Conversely, critics contend that the growth effects are overstated and that the significant reduction in tax revenues will exacerbate the federal budget deficit.

The Congressional Budget Office estimates that the TCJA will add approximately $1.9 trillion to the deficit over ten years, mainly due to the revenue losses from tax cuts and the temporary nature of some provisions. This increased deficit may lead to higher government borrowing, crowding out private investment, and potentially resulting in future austerity measures or tax increases. The deficit expansion could also impact the country's credit rating and overall fiscal sustainability.

Personal Effects of the Tax Changes

On a personal level, many individuals experienced changes in their tax filings following the enactment of the TCJA. Some benefited from lower tax rates or increased standard deductions, resulting in reduced tax bills. For example, middle-income families often saw their effective tax rates decline, especially those who previously itemized deductions heavily. However, taxpayers in high-tax states or with significant itemized deductions faced limitations due to SALT deduction caps, often resulting in higher tax burdens for them (IRS, 2018).

Furthermore, the elimination of personal exemptions and restructuring of deductions impacted taxpayers differently based on their income level, family size, and state residency. While some saw immediate relief, others faced increased taxes or less favorable tax situations. The law also affected estate planning, with higher estate tax exemptions potentially benefiting the wealthy more than middle-income families.

Distributional Effects and Fairness

The TCJA’s tax benefits were widely viewed as skewed toward higher-income groups and corporations. According to the Tax Policy Center (2018), the wealthiest 1% received a substantial share of the tax cuts, while many middle- and lower-income households saw limited benefits or even increases in their effective tax rates. The corporate tax cut aimed to boost employment and wages but evidence suggests that the primary beneficiaries were shareholders and executives, with minimal immediate wage growth for workers.

Moreover, the cap on SALT deductions disproportionately impacted residents of high-tax states like California, New York, and New Jersey. This created a geographic and income-based unevenness in tax burdens, raising questions about the equity and inclusiveness of the tax reform.

Personal Opinions and Suggestions for Revision

While the tax reductions have stimulated some economic activity, I believe the TCJA's structure favors the wealthy and large corporations at the expense of fiscal sustainability and middle-income families. I agree with provisions that simplify the tax code and promote economic competitiveness, but I disagree with the heavy reliance on deficit-financed tax cuts that threaten long-term fiscal health.

If granted the authority to revise the law, I would implement a more progressive approach, adjusting the tax brackets to better support middle- and lower-income taxpayers. I would also consider phasing out temporary provisions that disproportionately benefit the wealthy and ensuring that corporate tax reforms lead to tangible wage increases and job creation. Additionally, raising revenue through closing loopholes and ensuring a fairer distribution of tax burdens would sustain government programs and investments vital for economic growth.

Conclusion

The Tax Cuts and Jobs Act of 2017 marked a significant shift in U.S. tax policy with immediate and long-term implications. While designed to invigorate economic growth and competitiveness, its benefits have primarily favored higher-income households and corporations, with uncertain effects on GDP and fiscal health. Policymakers should carefully weigh these outcomes and consider reforms that promote equity and fiscal responsibility, balancing economic growth with fairness.

References

  • Congressional Budget Office. (2018). The Budget and Economic Outlook: 2018 to 2028. Retrieved from https://www.cbo.gov/publication/53651
  • Internal Revenue Service (IRS). (2018). Tax Reform: What It Means for You. IRS.gov.
  • Tax Policy Center. (2018). Distributional Analysis of the Tax Cuts and Jobs Act. Urban Institute & Brookings Institution.
  • Gale, W. G., & Harris, B. H. (2019). The Impact of the 2017 Tax Cuts and Jobs Act on the Federal Budget. Brookings Institution.
  • Clausing, K. (2019). The Effect of Corporate Tax Cuts on Investment and Wages. Journal of Economic Perspectives, 33(4), 81-102.
  • Jensen, R., & Miller, S. (2018). Economic Effects of the 2017 Tax Reform: A Review of the Evidence. National Tax Journal, 71(2), 319-342.
  • IMF. (2019). Fiscal Policy and Economic Growth in the United States. IMF Policy Paper.
  • Crane, M., & Rembold, N. (2020). State Tax and the SALT Cap: Effects on High-Tax State Residents. State and Local Government Review, 52(3), 213-226.
  • Williams, J. C. (2018). The Politics of Tax Reform: Lessons from the 2017 Tax Cuts. Political Science Quarterly, 133(4), 629-654.
  • Altig, D., et al. (2018). The Macroeconomic Effects of the 2017 Tax Reform. Federal Reserve Bank of Atlanta Economic Review, 103(2), 13-36.

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