The winners and losers in the Trump Tax Bill

With the Bill finally headed to a vote this coming week, taxpayers are scrambling to determine whether the legislation renders them winners or losers.

WINNERS

President Trump and his family

Numerous industries will benefit from the Republican tax overhaul, but perhaps none as dramatically as the industry where Trump earned his riches: Commercial real estate.  Trump, along with his son-in-law Jared Kushner, who is part owner of his own real estate firm, will benefit from lower taxes on so-called “pass through” income, which is money earned by partnerships and other types of businesses whose income is passed through to its owner and taxed at the individual tax rate. 

Big corporations

Industries like big retailers will benefit from the new corporate rate of 21 per cent, since those firms pay relatively close to the full 35 per cent rate.  

Multimillionaires 

An exemption for estates that owe what Republicans call the “death tax” was lifted to $22 million from $11 million. 

Private equity managers 

During the campaign, Trump railed against wealthy investment managers who, thanks to the so-called carried interest loophole, pay taxes on the majority of their pay at a lower capital gains rates. But the purported reform to this provision will affect few if any private equity managers, leaving the loophole intact.

Private schools and the people who can afford them

Parents would be eligible to use a type of tax-preferred savings plan — known as a 529 plan — to save for their children’s elementary and secondary education. Right now, those savings plans are only eligible for college. But they would be expanded to allow for up to $10,000 a year for tuition at private and religious schools.

LOSERS

People buying health insurance

With the repeal of the individual mandate, some people who currently buy health insurance because they are required by law to do so are expected to go without coverage. 

Individual taxpayers in the future

To stay under the $1.5-trillion limit for new deficits lawmakers set for themselves, they opted to make the cuts for individuals and families temporary, expiring at the end of 2025 — even as the corporate tax cuts will be permanent. 

The elderly 

A 2010 law requires that any legislation that adds to the federal deficit be paid for by spending cuts, increases in revenue or other offsets. Some cuts would be automatic, and the biggest program to be affected is Medicare, the health insurance programme for the elderly and disabled. Dozens of other programs are likely to be cut as well, but Medicare, which would face a 4 per cent cut, is by far the biggest. 

Low-income families 

Those who claim the earned-income tax credit will lose out on at least $19 billion over the coming decade under the bill because of the change in the way inflation is calculated. 

Owners of high-end homes

Under current law, the interest on mortgages for first and second homes is deductible for the first $1 million of the loan. The overhaul would cut that to the first $750,000 and eliminate the owner’s ability in the current law to deduct the interest on a home-equity loan up to $100,000. 

People in high property tax, high income states

Homeowners in high-tax states like New York, New Jersey and California could be big losers, particularly if they have high property taxes. Their ability to deduct their local property taxes and state and local income taxes from their federal tax bills is now capped at $10,000. 

Puerto rico

Puerto Rico had sought an exemption from new taxes, citing the frail state of its economy nearly three months after Hurricane Maria. But no such luck. The tax Bill treats affiliates of American companies on the island as if Puerto Rico were a foreign country and imposes a 12.5 percent tax on intellectual property.

Puerto Rico’s governor, Ricardo A. Rosselló, said the tax would hurt the biomedical and technology affiliates that make up about a third of Puerto Rico’s tax base.

The internal revenue service 

The tax collection agency has been underfunded and understaffed for years. Now, it will have a raft of new tax rules to deal with that will require upgrading its software, printing new manuals and explaining to confused taxpayers how things work. All this is expected to take place while the commission is working under the supervision of an interim commissioner who is expected to be replaced sometime next year.

The liquor business

Excise taxes for small brewers and distillers are reduced in the final agreement. Those industries are dominated by entrepreneurial small businesses often based in rural areas. They also have strong lobbyists, and many are based in states with powerful senators, like Senator Rob Portman of Ohio. Mr. Portman, who tucked a provision to help craft brewers into the Senate legislation, was part of the small team of lawmakers who merged the two bills into a final version.

Architects and engineers

They were originally restricted in how much they could benefit from the new pass-through provision. If they structure their businesses a certain way, the final version will let them benefit fully.

Tax accountants and lawyers

Mr. Trump once said his “dream” was to put tax preparation services out of business by simplifying the tax code. But the rushed legislation will probably have the opposite effect, as individuals try and make sense of the complicated new provisions, staggered dates and new rates. The uncertainty and confusion will probably create numerous new opportunities to game the system: tax preparers are sure to see a boom in business advising clients on how to restructure their employment and compensation arrangements to take advantage of the lower tax rates on income reported by corporations and pass-through entities.