Finance / Politics

The Retirement, Savings, and Other Tax Relief Act of 2018

money cash god we trust retirement savings relief taxLast night, Chairman Kevin Brady (R-TX) of the House Committee on Ways and Means released the “Retirement, Savings, and Other Tax Relief Act of 2018.”This bill includes several changes to the federal tax code.

  • Tax Extenders: The bill would extend a number of tax provisions that expired at the end of 2017. This list of provisions, commonly known as “extenders,” includes provisions related to alternative fuels, private mortgage insurance, and the depreciation of race horses and NASCAR facilities. The provision related to biodiesel would be extended until 2021, and then phased out by 2025.
  • Technical Corrections: The bill includes several “technical corrections” to the Tax Cuts and Jobs Act of 2017. It would clarify that qualified improvement property can be immediately deducted and clarifies an issue with the treatment of net operating losses.
  • Retirement Savings: The bill includes several changes to the administration of retirement accounts, particularly as they relate to small employers. Additionally, individuals would now be able to withdraw up to $7,500, without penalty, from retirement accounts for the birth or adoption of a child. It would also allow individuals to contribute to traditional Individual Retirement Accounts (IRAs) past the age of 70½.
  • Miscellaneous Other Provisions: The bill would include a provision allowing start-up businesses to deduct up to $20,000 in start-up expenses. This provision was previously included in the Tax Reform 2.0 package released earlier this year. It also provides disaster relief assistance to individuals impacted by natural disasters in 2018, including Hurricanes Florence and Michael, western wildfires, and weather events in Hawaii.

The bill also includes a few other provisions related to disaster relief areas and the administration of the Internal Revenue Service (IRS). The IRS would be required to submit a plan to improve its customer service within a year and a full plan to overhaul the entire agency by September 2020.

This bill will be considered by the full House of Representatives later this week, before heading to the Senate. Its passage in the Senate, however, is far from certain. We’ll continue to monitor developments and update our analysis over the coming days.

Reprinted with permission from - Tax Foundation - by Nicole Kaeding

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PaulE
2 years ago

Virtually none of these last minute House bills stands of chance of being both passed by the House and Senate before the end of the year. As such, that means they are little more than symbolism at this point. It is a certainty that the Democrats will NOT consider any additional pro-growth individual or business tax reform once they regain control of the House in January 2019. The focus in the House of Representatives ,for at least the next two years, will strictly be on endless investigations of everything and anything Trump related and on progressive, job killing and income killing, social warrior-type legislation. The kind of stuff that promotes the agenda of socialism which democrats love. So nothing of any constructive purpose for the American people. Not being negative. Just stating the reality of what the Democrats have already said they will be doing in the House leading up to the 2020 elections.

Dan W.
2 years ago
Reply to  PaulE

On the plus side, the stock market generally likes the certainty of gridlock.

Maybe 2019 will be a bounce back year on Wall St. because this year has been painful.

PaulE
2 years ago
Reply to  Dan W.

Yes, the stock market likes political gridlock, because it means nothing gets done in Washington to undermine the private sector. At least from the perspective of what is viewed as potentially new and onerous, anti-business laws and regs. Whatever anti-business, anti-growth legislation the Dems pass in the House will either die in the Republican controlled Senate, if the Republicans there don’t go all weak-kneed, or Trump will veto it. Still it means we get nothing positive done via legislation for the next two years, while we watch the Dem’s various dog and pony show hearings.

So far the stock market this year hasn’t been that bad considering the Fed is back to its usual routine of robotically hiking interest rates until they eventually break something and then they cause a recession. Seen this movie too many times over the last 50 years to not have taken precautions early on when the Fed was chatting about their plans for interest rate normalization and reducing their balance sheet of all the toxic debt they bought in 2009 and 2010. Their only tool is a sledge hammer and they are not known for orecise swings. Any way, we’ll have to wait and see if they have learned anything from their many past mistakes yet. We should know by early 2019 (January-February) on that score.

The problem with the Fedreal Reserve is it is a backward looking organization that implements policy and then has to wait 6 to 12 months to see if their policy has played out as expected or not in the real economy. Kind of like driving your car forward towards your intended destination, while only looking through your rear view mirror all the time. Problematic at best and prone to lots of what they like to call unintended consequences and collateral damage to the national economy.

The stock market on the other hand is inherently forward looking. So it tends to try and anticipate potential risk and either adjust strategies to mitigate risk or re-price the risk premium if the strategies remain unchanged. The stock market will begin to bounce back, except of course for the massively over-valued and crowded FAANG trade, once we get a clearer signal in early 2019 of what the Fed has planned for 2019 and what the likely outcome of China trade renegotiation talks produce. Everything else is pretty much useless noise to be ignored.

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