1. It's immediate and permanent: There are a few exceptions, but for the most part the big changes in this bill take effect immediately and have no expiration date. There's no phase-in (nor do the changes apply retroactively, i.e. to the 2017 tax year) and there's no deadline in the future by which Congress must act to extend the changes or watch them vanish. Phasing in tax cuts was a mistake both Ronald Reagan (1981) and George W. Bush (2001) made, as taxpayers simply waited for the full benefit of the changes. If the idea is to stoke economic growth, a slow phase-in isn't the way to do it. Ditto for the expiration date that came with the Bush tax cuts: If the idea is to affect incentives and behavior at the margins, better to do that with a long horizon, not a short one.
2. It represents a substantial simplification: Not just because the brackets go from seven to four and because the larger standard deduction means fewer Americans will need to itemize. A number of deductions and credits have been removed, meaning there's less reason to itemize as well.
3. It represents a decrease in marginal tax rates for almost everyone: The pay-off from the removal of so many deductions and credits is a lower rate structure throughout almost all of the brackets; see the tables below (keeping in mind that this appears more complex than it really is, because I wanted to allow for direct comparisons but the income brackets don't line up exactly from current to new):
Married, filing jointly
As you can see, across most of the income spectrum tax rates are falling or staying the same. The most notable exception is in that initial part of the 12 percent bracket. But here, you have to keep in mind that we're talking about taxable income -- and because the standard deduction is increasing, many if not most taxpayers should see more of their income below the taxable threshold, i.e. in the zero percent bracket.
4. It maintains and enhances some key tax credits for working families: The Earned Income Tax Credit for low-income workers remains in place. The Child Tax Credit grows to $1,600 from the current $1,000, making families whole for the loss of personal exemptions for their children. A new Family Tax Credit of $300 per non-child filer or dependent is created, partially making up for the loss of other personal exemptions (albeit for just five years, a rare change in the bill that isn't permanent).
5. It's pro-growth when it comes to businesses: The cut in the corporate tax rate to 20 percent puts the U.S. back in the game when it comes to our competitors around the world. While many companies were able to reduce their tax bills by taking advantage of a series of deductions and credits, many weren't; the headline rate really does matter to many corporate taxpayers. In any case, it's been odd to see so many of the same people who are critical of "money in politics" argue that there was no need to cut the corporate tax rate because many companies didn't pay the headline rate ... thanks to loopholes they got through vigorous lobbying. Not to mention that cutting the corporate rate was also an objective of President Obama; he simply disagreed with Republicans about hot to go about it. It's a win for tax-code simplicity and against special-interest lobbying to create a lower rate for all, not only those companies that can afford to lobby for better tax treatment.
6. It leaves 401(k) investments alone: As I mentioned before , it would have been a big mistake for Congress to limit contributions to these retirement plans, as a matter of policy and politics. They left them alone.
7. It limits, but doesn't eliminate, the state and local tax deduction: The SALT deduction is one of the biggest in the current tax code, and as I previously explained it amounts to a big incentive for state and local governments to raise taxes. The bill eliminates the deduction for income and sales taxes paid and caps the deduction for property taxes paid at $10,000. That's a start to getting Washington out of the business of forcing low-tax states to subsidize higher-tax states.
8. It limits the mortgage-interest deduction: Currently, a married couple can deduct the interest paid on a home loan of up to $1 million; the bill lowers that amount to $500,000 (while grandfathering in mortgages that existed as of Thursday). The home-building and real-estate industries are apoplectic, but research has shown countries without mortgage-interest tax deductions such as Australia and Canada have similar home-ownership rates. So it's questionable whether the government is wise to subsidize home ownership in this way. The bill also limits the deduction to primary residences, and not second homes.
Those are some quick hitters. I'm sure there are other aspects that will merit discussion, but all in all this looks like the kind of bill Republicans have spent years promoting on the campaign trail. They won elections promising to do something along these lines; now they need to find a way to get it across the finish line.