AARP Hearing Center
House Republicans approved a massive $1.5 trillion tax overhaul package Thursday, the first step in the majority’s plan that would provide big tax rate cuts to corporations but raise taxes and health care costs for millions of older Americans.
The House approved the Tax Cuts and Jobs Act by a 227-to-205 vote. All House Democrats voted against the measure. They were joined by 13 Republicans, virtually all from high-tax states, including New York, New Jersey and California, which would be hardest hit by measures that would eliminate or cap popular tax breaks on mortgage interest and state and local taxes.
The measure would hurt older Americans in a variety of ways. It would eliminate the medical expense deduction, which allows taxpayers to deduct out-of-pocket medical and health care expenses that exceed 10 percent of their income. That would result in a tax increase for millions of older Americans. Nearly three-quarters of the taxpayers who claim this deduction are over 50 years old, and 70 percent have annual incomes below $75,000, according to AARP’s Public Policy Institute.
Supporters of the House bill argue that it would cut taxes for many low- to middle-income Americans and that lowering the top corporate tax rate from 35 percent to 20 percent would spur economic growth. But critics say most of the benefits would go to businesses and the wealthy.
An AARP analysis found that if the House bill became law, 1.2 million taxpayers over age 65 would actually see their taxes increase in 2018, and that the number would swell to 4.9 million by 2027. The analysis also showed that more than 5 million older Americans would not see any tax relief.
“Changes to the tax code should not result in a disproportionate, adverse impact on older Americans,’’ said AARP Executive Vice President Nancy LeaMond. “Efforts to restructure all or part of the federal tax system should recognize the importance and maintain incentives for health and retirement security.”
The House bill would cut the number of tax brackets from seven to four, setting new tax rates at 12 percent, 25 percent and 35 percent, and keeping the top bracket at 39.6 percent.
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