Bill Overview
Title: Protecting Family and Small Business Tax Cuts Act of 2022
Description: This bill makes permanent provisions affecting individual and business taxpayers that were enacted in 2017 by the Tax Cuts and Jobs Act and are scheduled to expire at the end of 2025. The bill makes permanent provisions that reduce individual and capital gain tax rates. The bill increases the standard tax deduction for individual taxpayers. It also increases and modifies the child tax credit and raises the contribution base for the tax deduction of charitable contributions. The bill allows additional contributions to ABLE accounts (tax-exempt accounts designed to enable individuals with disabilities to save and pay for disability-related expenses). It exempts from taxation combat zone benefits of members of the Armed Forces serving in the Sinai Peninsula of Egypt and the moving expenses of servicemembers. Additionally, the bill lowers to $750,000 the amount of mortgage debt eligible for an interest expense tax deduction; excludes from the gross income of student borrowers income attributable to the discharge after 2025 of loan debt due to death or disability; makes permanent the limitation on the tax deduction for state and local taxes and denies a deduction for foreign real property taxes; makes permanent the tax deduction of the income of certain pass-through business entities; repeals the tax deduction for personal tax exemptions and the exclusion of employer-provided bicycle commuter fringe benefits; terminates certain miscellaneous itemized tax deductions; doubles the estate and gift tax exemption amount; and makes permanent the increase of the alternative minimum tax exemption amount for individual taxpayers.
Sponsors: Rep. Davis, Rodney [R-IL-13]
Target Audience
Population: Individuals impacted by the Protecting Family and Small Business Tax Cuts Act of 2022
Estimated Size: 300000000
- The bill impacts individual taxpayers by making permanent provisions that reduce individual and capital gain tax rates.
- It increases the standard tax deduction and modifies the child tax credit, affecting families and individuals who rely on these deductions.
- It allows for additional contributions to ABLE accounts, impacting individuals with disabilities and their families.
- The bill contains provisions for servicemembers, such as exempting from taxation combat zone benefits, directly affecting military personnel.
- It excludes from income student loan debt discharged due to death or disability, impacting student borrowers and their families.
- There are provisions related to mortgage interest deductions, impacting homeowners.
- By doubling the estate and gift tax exemption, it affects individuals concerned with inheritance and estate planning.
- Small business owners are affected by the provisions on pass-through business entity income.
Reasoning
- A variety of stakeholders are targeted, including families, military personnel, students, homeowners, and small business owners, so a diverse range of individuals were selected to capture the potential impacts.
- The budget allows for broad applicability across many sectors, but the magnitude of individual impact can vary greatly depending on individual circumstances.
- The aim is to consider both immediate (Year 1) and long-term (Year 20) effects on wellbeing, recognizing that permanent tax changes will have continued future implications.
- Consideration was given to the policy's focus areas, such as the military, disabilities, small businesses, and general taxpayers. These are reflected in both high direct impact groups and more common, low-impact groups.
Simulated Interviews
Small Business Owner (Austin, TX)
Age: 45 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 20.0 years
Commonness: 4/20
Statement of Opinion:
- The reduction in individual and capital gain tax rates is beneficial for my family.
- I'm happy about the permanent tax deduction of pass-through income, which directly affects my business.
- I'm concerned about the limitation on state and local tax deductions.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 8 | 6 |
| Year 3 | 8 | 6 |
| Year 5 | 8 | 6 |
| Year 10 | 9 | 5 |
| Year 20 | 9 | 5 |
Graphic Designer (Los Angeles, CA)
Age: 32 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 5.0 years
Commonness: 12/20
Statement of Opinion:
- Increasing the standard tax deduction is helpful as a single filer.
- I don't benefit from many child-related provisions as I don't have children.
- The changes don't seem to affect my student loans directly as they won't be forgiven.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 6 | 5 |
| Year 3 | 6 | 5 |
| Year 5 | 6 | 5 |
| Year 10 | 5 | 5 |
| Year 20 | 5 | 5 |
IT Specialist (Columbus, OH)
Age: 28 | Gender: other
Wellbeing Before Policy: 6
Duration of Impact: 15.0 years
Commonness: 8/20
Statement of Opinion:
- I appreciate the increase in the standard deduction as we're planning to buy a home.
- I have some concerns about the limitations on mortgage interest deductions.
- The increase in child tax credits will be helpful in the future when we have children.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 8 | 6 |
| Year 3 | 8 | 6 |
| Year 5 | 8 | 6 |
| Year 10 | 9 | 6 |
| Year 20 | 9 | 6 |
Lawyer (New York, NY)
Age: 55 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 20.0 years
Commonness: 3/20
Statement of Opinion:
- I will benefit from the permanent estate tax exemption as part of my long-term planning.
- Limits on state and local tax deductions are significant given my residency in New York.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 7 |
| Year 2 | 8 | 7 |
| Year 3 | 8 | 7 |
| Year 5 | 8 | 7 |
| Year 10 | 9 | 7 |
| Year 20 | 9 | 7 |
Military Officer (Raleigh, NC)
Age: 39 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 10.0 years
Commonness: 2/20
Statement of Opinion:
- Exemption from taxation on combat zone benefits is directly beneficial.
- The changes to child tax credits are helpful for my family.
- The mortgage interest deduction limits have no current impact as we rent housing provided on base.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 6 |
| Year 2 | 8 | 6 |
| Year 3 | 8 | 6 |
| Year 5 | 8 | 5 |
| Year 10 | 8 | 5 |
| Year 20 | 8 | 5 |
Graduate Student (Denver, CO)
Age: 23 | Gender: female
Wellbeing Before Policy: 4
Duration of Impact: 2.0 years
Commonness: 10/20
Statement of Opinion:
- The exclusion of forgiven student loan debt is reassuring should something happen.
- Not many immediate short-term benefits for students not planning on disabilities or death.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 4 |
| Year 2 | 5 | 4 |
| Year 3 | 5 | 4 |
| Year 5 | 5 | 4 |
| Year 10 | 5 | 4 |
| Year 20 | 5 | 4 |
Retired Teacher (Phoenix, AZ)
Age: 60 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 20.0 years
Commonness: 11/20
Statement of Opinion:
- I'm not immediately affected as much by employment-related changes.
- Increased standard deductions might result in slight tax savings annually.
- Estate tax changes could aid in passing on estates to children.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 7 | 7 |
| Year 5 | 7 | 7 |
| Year 10 | 8 | 7 |
| Year 20 | 8 | 7 |
Real Estate Investor (Buffalo, NY)
Age: 64 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 20.0 years
Commonness: 2/20
Statement of Opinion:
- Increased deduction for pass-through businesses is highly beneficial for my investments.
- The cap on mortgage interest deduction affects some of my real estate strategies.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 7 | 6 |
| Year 5 | 8 | 6 |
| Year 10 | 8 | 6 |
| Year 20 | 8 | 6 |
Mother and Community Volunteer (Chicago, IL)
Age: 41 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 15.0 years
Commonness: 5/20
Statement of Opinion:
- Child tax credits increase is crucial for my family.
- Concerns about local tax deduction limitations as we live in a high property tax area.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 5 |
| Year 2 | 8 | 5 |
| Year 3 | 8 | 5 |
| Year 5 | 8 | 5 |
| Year 10 | 7 | 5 |
| Year 20 | 7 | 5 |
Financial Advisor (Miami, FL)
Age: 50 | Gender: male
Wellbeing Before Policy: 8
Duration of Impact: 20.0 years
Commonness: 3/20
Statement of Opinion:
- My client's planning strategies benefit from the estate tax permanence and capital gain tax reductions.
- Personally affected less, but aware of broader client impacts.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 9 | 8 |
| Year 2 | 9 | 8 |
| Year 3 | 9 | 8 |
| Year 5 | 9 | 8 |
| Year 10 | 9 | 8 |
| Year 20 | 9 | 8 |
Cost Estimates
Year 1: $80000000000 (Low: $60000000000, High: $100000000000)
Year 2: $82000000000 (Low: $62000000000, High: $102000000000)
Year 3: $84000000000 (Low: $64000000000, High: $104000000000)
Year 5: $88000000000 (Low: $68000000000, High: $108000000000)
Year 10: $95000000000 (Low: $75000000000, High: $115000000000)
Year 100: $120000000000 (Low: $100000000000, High: $140000000000)
Key Considerations
- The 2017 Tax Cuts and Jobs Act anticipated many provisions to sunset in 2025, this bill negates that expiration, making significant tax cuts permanent.
- Making permanent these tax provisions could increase the national deficit unless accompanied by a cut in government spending or increase in other forms of taxation.
- While this may lead to short-term economic growth, long-term fiscal sustainability could be challenged.
- Distributional effects favor higher income brackets, which could raise issues of inequality.