This week, Republican leaders in the U.S. House and Senate pushed through major reforms in the U.S. tax code. The votes in both the House and Senate were along party lines. According to estimates, the new “Tax Cuts and Jobs Act” is estimated to cost the federal government roughly $1.46 trillion over 10 years. President Trump signed the bill into law on Friday morning. The signing of this bill may result in automatic spending cuts in 2018, which would be triggered from passing legislation that increases the federal deficit without corresponding revenue-raisers or cost-savers to offset the additional debt. These automatic spending cuts would include $25 billion in Medicare alone. ACG has highlighted this issue and continues to monitor this situation. The tax bill lowers rates for each of the 7 individual tax brackets, topping out at 37% for the highest earners. The bill also doubles the standard deduction and increases the child tax credit. However, Congress must reauthorize these provisions after 2027. The bill places limits on longstanding mortgage interest deductions for homeowners, as well as capping the deduction on state and local taxes. ACG encourages you to speak with a tax professional to learn more.
ACG also encourages to you take advantage of an exclusive ACG Member Benefit and affinity program: ACG’s partnership with Wealth Management Strategies.
How are GI practices and patients impacted by the changes in the tax reform bill?
Tax reform for businesses: The bill also includes major reforms for businesses. The corporate tax rate will be decreased to 21% starting in 2018 (currently at 35% for 2017). Also, non-corporate businesses organized as “pass-through” companies will be taxed at a rate less than 30%. Owners of these pass-through companies pay revenue derived from their businesses on their individual taxes.
ACA individual mandate effectively repealed: The bill makes changes to the mandate on individuals to purchase health insurance, which was a key provision in the Patient Protection and Affordable Care Act (known as the ACA). The bill does this by reducing the tax penalty to $0 for individuals failing to purchase adequate health insurance. This starts in 2019.
Itemized deduction for medical expenses: The bill retains the deductions, but reduces the threshold to 7.5% adjusted gross income (AGI) for 2017 and 2018, then reverting to 10% of AGI for 2019 and beyond.
Education deductions and tax incentives: The bill does not incorporate repealing certain education-related items that were in U.S. House’s version, including: the deduction for interest on education loans and the deduction for qualified tuition and related expenses; the exclusion for qualified tuition reduction programs (which impacts graduate teaching or research assistants who receive tuition waivers); the exclusion for employer-provided education assistance.
ACG will continue to update membership on other developments on Capitol Hill as 2017 comes to a close. ACG remains concerned over the lack of federal Medicaid funding for areas including Puerto Rico and the U.S. Virgin Islands, as well as reauthorizing the Children’s Health Insurance Program (CHIP). There are also additional outstanding issues and pending legislation that still may be addressed, such as the legislation designed to help stabilize and subsidize insurance plans under the ACA, the annual year-end Medicare policies (and how Congress will pay for these policies), and the important legislation which ACG has advocated for Congress to pass over the course of 2017.
Whitfield L. Knapple, MD, FACG
Chair, ACG Legislative and Public Policy Council