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July 20, 2023
The House Ways & Means Committee has advanced a Republican tax cut bill that proposes an additional $4,000 deduction for joint federal tax filers and $2,000 for single filers. The “guaranteed deduction bonus” is part of the GOP’s plan to increase standard deductions in tax years 2024 and 2025 for specific income brackets, benefiting taxpayers with modified adjusted gross income up to $400,000 for single filers and $200,000 for joint filers.
Democrats criticized the proposal as flawed, but expressed willingness to discuss a major tax bill this year. The 2017 Republican-authored tax cut had significantly increased the standard deduction, reducing itemized deductions like state and local taxes and mortgage interest.
The Penn Wharton Budget Model and the bipartisan Joint Committee on Taxation estimate that the new GOP plan would cut taxes for a majority of households, with the biggest cuts benefiting those earning between $15,000 and $40,000. Those with incomes above $400,000 or below $19,500 would not see benefits, while those making less than $15,000 generally do not pay federal income tax.
However, concerns have been raised regarding the plan’s response to inflation. The American Enterprise Institute criticizes it as poorly designed, increasing demand when the Federal Reserve aims to stabilize prices. The plan’s estimated cost of $96 billion over two years has also raised concerns.
Despite these issues, the tax plan is expected to pass the House but the Majority Leader as indicated a vote will not likely occur before August. Democrats have indicated they are open to discussing a tax bill but the path to a bipartisan agreement remains uncertain.
