Why Should You Care About the Tax Bills?

Why Should You Care About the Tax Bills?

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By No Labels

Why Should You Care About the Tax Bills?

Congress has been arguing over how to overhaul the U.S. tax code for weeks now. The House passed a bill. The Senate will consider its own legislation this week. Yet amid all this, there’s one basic question that rarely gets addressed head on: Why should we care?

The answer is both simple and profound: A tax bill is one of the few congressional acts that can affect almost every working family in America. Among all the things that Congress does, from naming post offices to declaring war, major tax changes arguably have the broadest reach and the most direct impact on all of us.

If you thought companies paid the largest share of taxes in the United States, you would be wrong. Individual income taxes are the federal government’s single largest source of revenue, according to a Pew Research Center analysis. Nothing else even comes close. Individual income taxes provide about 48 percent of the government’s money, while corporate income taxes provide about 9 percent.

The IRS processed roughly 151 million returns from individuals in 2016, according to an IRS report. Roughly speaking, that represents almost three quarters of America’s working-age population between 15 and 64.

The tax code touches most of us. If you work for a living, own a home, invest your money, save for retirement, inherit assets or participate in the U.S. financial system in other common ways, then the tax code matters — and there’s a good chance the tax bills under consideration will impact your bankroll.

No Clear Outcome — Yet

Exactly how we will feel that impact is still a big TBD. There is much to be decided before a tax bill is finalized.

For starters, the bill in the Senate will be debated this week and its future is uncertain. Republicans hold a 52-seat majority and they’ll need 50 yes votes to get a bill passed with the vice president’s tie-breaking vote. Provisions in the bill are very likely to change as Senate leaders try to gain support.

In addition, the House and Senate bills contain huge differences (here’s a list from The New York Times and a one-page chart by the Heritage Foundation). Both bills make widespread changes, but the two have different recipes for how they treat tax brackets, the estate tax, popular deductions — even the individual health insurance mandate contained in the Affordable Care Act. The Senate bill repeals it while the House bill does not.

Assuming the Senate can pass a bill, it will have to be reconciled with what the House approved. The upshot is that there is no final bill yet to support or oppose, but there may be before the end of the year. What can you do until then?

  • Be Skeptical. When politicians promise to cut taxes (or raise them, for that matter), that doesn’t mean your taxes will automatically change. What happens to your tax bill will depend on the dozens of variables that make up your personal financial situation.
  • Read Up. Follow the action by reading or watching unbiased news sources that explain the changes in plain English. Also, tune in to what your tax preparer is saying. Many offer analysis.
  • Apply This Test. Without digging into details, there is one test you can apply to any bill that Congress considers: does it have bipartisan support? If a bill is supported by Republicans and Democrats compromise is generally involved.

This is an issue that shouldn’t be about partisan philosophy or political victory. This one is about your wallet. It will pay — perhaps literally — to keep an eye it.

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