Bill Overview
Title: Permanent Extension of Rate Cuts and Extension of National Tax Simplification Act of 2022
Description: This bill makes permanent provisions in Public Law 115-97 (also known as the Tax Cuts and Jobs Act) relating to individual taxpayers, including the modification of individual income and capital gains tax rates and the increased exemption for the alternative minimum tax. It also increases the standard tax deduction and repeals the limitation on itemized tax deductions.
Sponsors: Rep. Schweikert, David [R-AZ-6]
Target Audience
Population: Individuals impacted by changes to tax rates and deductions
Estimated Size: 230000000
- The legislation impacts individual taxpayers by making permanent the changes introduced by the Tax Cuts and Jobs Act (TCJA) for individual income taxes.
- It involves modifications to individual income and capital gains tax rates, affecting all individuals filing income taxes.
- The bill increases the standard deduction, which directly impacts individual taxpayers using the standard deduction rather than itemized deductions.
- Repeal of the limitation on itemized tax deductions will affect those taxpayers who choose to itemize deductions.
- The provisions of the TCJA have been previously applicable globally, so these changes would primarily affect U.S. citizens or residents filing tax returns in the U.S.
Reasoning
- The PERCENTS Act of 2022 targets individual taxpayers with measures affecting income and capital gains, plus deductions. As the tax system is fundamental to many Americans' financial planning, it will likely influence a wide array of demographics.
- Given the extensive number of taxpayers affected (approximately 158 million tax returns annually, covering a range of income levels and filing statuses), the policy may have diverse impacts on wellbeing scores, depending on how individuals adapt to the nuanced changes in tax strategy.
- High earners and those who itemize deductions would be among those most significantly impacted by these provisions, as their tax liabilities could change considerably. In contrast, taxpayers who utilize the standard deduction might mostly see immediate benefits.
- The budget allocation implies that this policy is designed to sustain significant reform while remaining within feasible fiscal constraints, meaning most benefits must be widely applicable rather than niche.
- Overall, simulation needs to capture variance from unchanged scores in low-income individuals to significant changes in high-income earners or those benefiting from repeal of the itemized deduction cap.
Simulated Interviews
Financial Analyst (California)
Age: 45 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 20.0 years
Commonness: 5/20
Statement of Opinion:
- The extension of the tax cuts is a relief as it provides more stability for financial planning.
- Repealing the limit on itemized deductions is a big benefit for my household, enhancing our overall tax refund.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 6 |
| Year 2 | 8 | 6 |
| Year 3 | 9 | 6 |
| Year 5 | 9 | 6 |
| Year 10 | 9 | 6 |
| Year 20 | 8 | 6 |
Software Developer (Texas)
Age: 27 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 5.0 years
Commonness: 15/20
Statement of Opinion:
- For me, making the tax cuts permanent means a more predictable future and a little more cash to save or spend monthly.
- I don't see major changes, though, since I use the standard deduction.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 8 | 7 |
| Year 3 | 8 | 7 |
| Year 5 | 8 | 7 |
| Year 10 | 7 | 7 |
| Year 20 | 7 | 7 |
Retired (Ohio)
Age: 63 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 10.0 years
Commonness: 12/20
Statement of Opinion:
- It's great to see these changes made permanent. Reducing the uncertainty around tax rates means a lot for our retirement planning.
- Repealing the deduction limit positively impacts us too, as we can maximize charitable contributions without penalties.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 7 |
| Year 2 | 8 | 7 |
| Year 3 | 9 | 7 |
| Year 5 | 9 | 6 |
| Year 10 | 8 | 6 |
| Year 20 | 7 | 5 |
Freelance Graphic Designer (New York)
Age: 35 | Gender: male
Wellbeing Before Policy: 5
Duration of Impact: 5.0 years
Commonness: 8/20
Statement of Opinion:
- The tax rate cuts are helpful, but as someone whose income varies, the alternative minimum tax exemption is a real boon.
- This could make my tax less of a burden when I have a good year.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 6 | 5 |
| Year 3 | 7 | 5 |
| Year 5 | 7 | 5 |
| Year 10 | 7 | 5 |
| Year 20 | 6 | 5 |
Small Business Owner (Florida)
Age: 50 | Gender: other
Wellbeing Before Policy: 6
Duration of Impact: 15.0 years
Commonness: 4/20
Statement of Opinion:
- Keeping the rate cuts is crucial to maintaining profitability, especially post-COVID.
- The deduction cap repeal is advantageous for reinvesting in the business and securing personal finances.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 6 |
| Year 2 | 9 | 5 |
| Year 3 | 9 | 5 |
| Year 5 | 9 | 5 |
| Year 10 | 9 | 5 |
| Year 20 | 8 | 5 |
Elementary School Teacher (Illinois)
Age: 29 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 2.0 years
Commonness: 18/20
Statement of Opinion:
- The permanence of these tax cuts helps with budgeting, though as someone who files standard deduction, the immediate benefits are minimal.
- However, anything that puts a little more cash in my pocket can help when things get tight.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 6 | 6 |
| Year 5 | 6 | 6 |
| Year 10 | 6 | 6 |
| Year 20 | 6 | 6 |
Factory Worker (Georgia)
Age: 58 | Gender: male
Wellbeing Before Policy: 5
Duration of Impact: 3.0 years
Commonness: 14/20
Statement of Opinion:
- Given my situation, any tax changes that put money back into my pocket are welcomed, even if it's gradually over the years.
- I'm concerned about how it might be balanced elsewhere, but right now, any relief is appreciated.
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 |
Non-profit Manager (Washington)
Age: 33 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 10.0 years
Commonness: 7/20
Statement of Opinion:
- This policy allows undisturbed continuation of our financial strategy which is heavily reliant on deductions, particularly charities.
- It enhances our capability to commit more towards critical causes without facing tax penalties.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 7 |
| Year 2 | 8 | 7 |
| Year 3 | 9 | 7 |
| Year 5 | 9 | 7 |
| Year 10 | 8 | 7 |
| Year 20 | 7 | 7 |
Healthcare Worker (North Carolina)
Age: 40 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 15.0 years
Commonness: 6/20
Statement of Opinion:
- The repeal of the deduction limit opens up major relief through medical expense deductions.
- With persistent high expenses, having the ability to fully utilize these deductions long-term makes a big difference.
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 | 6 | 5 |
Engineer (Colorado)
Age: 48 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 7.0 years
Commonness: 10/20
Statement of Opinion:
- A permanent cut means long-term potential for increased savings and investments.
- Being able to rely on these deductions free me from recalculating strategies every few years.
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 | 7 | 6 |
| Year 20 | 6 | 6 |
Cost Estimates
Year 1: $150000000000 (Low: $140000000000, High: $160000000000)
Year 2: $150000000000 (Low: $140000000000, High: $160000000000)
Year 3: $150000000000 (Low: $140000000000, High: $160000000000)
Year 5: $150000000000 (Low: $140000000000, High: $160000000000)
Year 10: $150000000000 (Low: $140000000000, High: $160000000000)
Year 100: $150000000000 (Low: $140000000000, High: $160000000000)
Key Considerations
- The revenue impact of extending TCJA provisions indefinitely would significantly increase the federal deficit due to substantial reductions in annual tax receipts.
- Consideration must be given to the potential economic growth generated by increased disposable income for individuals, though the magnitude and duration of this effect are uncertain.
- There are distributional effects; making tax cuts permanent would predominantly benefit higher income groups that were positively impacted by the TCJA originally.