After eleven months of a new Administration, it finally looks like our Senators and Congressmen are going to come to an agreement on a new Tax Plan. Throughout the time, President Trump was candidate Trump he promised a Border Wall, repeal Obamacare, and lower taxes for the Middle Class. Since the election, we have listened to and watched most of our politicians tripping over themselves to get in front of the TV Cameras to explain why they do or don’t support any of these initiatives. It finally looks like they are going to get a Tax Bill brought to pass. What does it all mean to those who are Company Truck Drivers and Owner/Operator Truck Drivers? I’ll try to break it down for you, a little.
A Simple Tax Plan
When Ronald Reagan was elected President in 1980 he campaigned on a less confusing tax code and reducing taxes on the middle class. At that time the top marginal tax rate on individual incomes was 70%. They slashed it to 28%. Corporate tax rates were reduced to 34% from 48%. Additionally, Reagan cut numerous regulations that Jimmy Carter had implemented. Reagan also supported a policy for a stronger dollar. These ideas are very similar to what Trump is now trying to do. Under Reagan, tax revenues actually increased from $517 billion to $909 billion. The Dow Jones Industrial Average grew almost 14-fold between 1982 and 2000. But, since the end of Reagan’s presidency, our politicians have let things go. Taxes have gone back up and spending has gotten completely out of control!
Dick Armey served in the U.S. House of Representatives from 1985-2003. He was one of the engineers of the “Republican Revolution” in the 1990s. Congressman Armey proposed a tax plan to eliminate the entire tax code. Mr. Armey was the leading proponent of a Flat Tax. A family of four must earn at least $33,000 before it owed any taxes. Everyone making over $33,000 was to be taxed at 17%. No loopholes, no deductions, no tax breaks, no tables, and no schedules! I can still remember him holding up his postcard in front of the TV cameras and stating, that was all anyone would need to file their taxes. Steve Forbes, publisher of Forbes Magazine, and Ron Paul, former Congressman from Texas, are proponents of this type of tax plan. That would be a legitimate SIMPLE TAX PLAN!! I was hoping, when I listened to candidate Trump that, that would be the nature of a tax bill we would get. I guess I put too much faith in our politicians!!
Here is a list of the new changes. These are not all the changes, but some changes that will affect middle-class earners and the majority of Truck Drivers. I am listing changes that will affect people earning between $40,000 and $90,000 per year.
Single filers making between $9,329 and $91,901 would see their income taxes reduced by 3% to 4%. The Standard deduction would go from $6,350 to $12,000.
Married and filing jointly, making between $16,00 and $153,100 would see a 3% percent reduction in taxes. The Standard deduction would go from $12,000 to $24,000.
The child tax credit is increased to $2,000 per child. This new plan will only allow a $10,000 deduction for property tax and state and local taxes. Interest paid on a mortgage will be capped at $750,000.
The final bill repeals the federal fine imposed for not obtaining Obamacare or other health insurance. Current law allows for a deduction of medical expenses in excess of 10% of adjusted gross income. The final bill will change the threshold to 7.5% of AGI, but only for 2018.
The final version of the Republican plan would still have seven income tax brackets. There would be slightly lower rates and adjusted income ranges.
About 70% of Americans claim the standard deduction. Under this plan, their paychecks will increase, slightly. The standard deduction for a single taxpayer is $6,350 with a personal exemption of $4,050. These will be combined into one larger standard deduction in 2018. Single taxpayers will be able to deduct $12,000. Married couples will be able to deduct $24,000. When it’s all said and done, taxpayers making between $9,329 and $91,901 per year will see an increase in their yearly salary of $1500 to $2000.
All of these new plans expire in 2025. It will be up to future Congressmen and Senators to keep these in effect!
The corporate income tax rate will go from 35% to 21%. Sets a one- time repatriation tax of 8% on liquid assets and 15.5% on cash equivalents for about $2.6 trillion held by large corporations overseas. This would encourage the large corporations to bring the cash they currently hold overseas, back to the United States. This would bring our tax code more in-line with other industrialized nations. The bill allows businesses to write off expenses, investments in new plants, and the purchasing of new equipment. This would only be in effect for five years.
Due to the higher standard deduction, a Company Truck Driver would probably be just as well off to just take the standard deduction. The per-diem deduction might not be over $24,000 if you are married. A single driver would have to have $12,000 in per-diem. An Owner/Operator Driver may end up with more deduction with all the write-offs for purchasing new equipment and other expenses associated with your business.
A family of four can take the standard deduction of $24,000 and two children would be a $4.000 deduction. There would be no reason to itemize unless you have a lot of medical expenses and mortgage interest more than $28,000. One has to consider you will be allowed to deduct up to $10,000 in property and state taxes.
This bill would be about the same for a single company truck driver. Only in their case, they would need more than $12,000 in deductions.
Improve the Economy
Even though they all talked about a simple tax bill, this is not what we have here. One like what Dick Armey was proposing years ago, was what I was looking for. This new tax bill will be a big boost for our economy, but only if the large corporation uses the money they repatriate from overseas, to invest in new plants, equipment and employee wages/ benefits. If they use the money to repurchase stocks and to increase stock dividends it will only make the fat cats on Wall Street more prosperous.
There are also provisions in this bill to increase the safe exploration of oil and gas, as well as deductions for investments in Clean Energy. If they can also get a good infrastructure plan in place, that will greatly improve our economy. This tax bill should get more money away from the Government and into the private sector and this should lead to better wages and a lot more work for Truck Drivers.Look forward to hearing from you!! Comment Below! Wayne