Overview
President Trump Signs Tax Reform Bill
Today President Trump signed H.R. 1 into law. Among other things, the act lowers the corporate tax rate to 21%, establishes a territorial tax system for multinational companies, and provides a deduction for income earned through pass-through businesses. The act also eliminates the Affordable Care Act individual mandate, eliminates or reduces a number of itemized deductions and exemptions, and increases the standard deduction. The act will cost $1.46 trillion, according to an estimate from the Congressional Budget Office and the Joint Committee on Taxation. With a few exceptions, the act will largely take effect in 2018. A summary of several provisions of the legislation that will affect tax-exempt organizations is available here.
President Trump also signed into law a short-term spending bill that suspends the PAYGO budget rule. PAYGO was intended to prevent budget deficits by requiring decreases in revenue to be matched with cuts in mandatory spending. The PAYGO rules, which would have been triggered by the additional deficits caused by tax reform, would have required spending cuts in certain mandatory government programs, including Medicare.
CBO Releases Analysis of Distributional Effects of Changes in Taxes and Spending Under Tax Reform Bill
The Congressional Budget Office (CBO) has released an analysis of the distributional effects of changes in taxes and spending under H.R. 1. Based on that analysis, the overall combined effect of the change in net federal revenues and spending is to decrease deficits (primarily stemming from reductions in spending) allocated to lower-income tax filing units and to increase deficits (primarily stemming from reductions in taxes) allocated to higher-income tax filing units.