President Donald Trump is expected to sign the Tax Cuts and Jobs Act, a sweeping $1.5 Trillion plan to overhaul the nation’s tax code. The Republican backed-bill is supposed to provide middle-class families across the country with tax breaks, while at the same time creating more jobs by lowering the tax burden on corporations. But what kind of impact will the Tax Cuts and Jobs Act have on Nevada?
To find out, we spoke to Meredith Levine with the Guinn Center for Policy Priorities -- a Las Vegas-based, nonpartisan think tank. She recently published a report examining how the tax bill could possibly affect the state.
Will Most Nevadans Receive A Tax Cut?
For the most part, yes.
According to the analysis by the Guinn Center's Meredith Levine...
"We don't have a clear-cut sense of this is going to be beneficial [or] this is going to be very harmful because every individual taxpayer has his or her own set of circumstances and the provisions in the bill tend to interact with one another in ways that can affect them differently. It has a push-pull effect in the bill. On average what we would see is that in the short term, taxpayers across all income percentiles would enjoy some sort of tax relief. Over the years, because the provisions in the Tax Cuts and Jobs Act do expire after the 2025 tax year, the nature of those effects start to diminish."
Standard vs. Itemized Deductions
Under the provisions of the bill, standard deductions will nearly double. For example, a couple who filed jointly this year will receive a standard deduction of $12,700. That standard deduction will jump to $24,000 during the 2018 tax year. The same is true for those who file individually or as head of household. This will likely have the biggest impact on a majority of Nevadans.
Inversely, the amount of some of the more popular itemized deductions will be capped at $10,000 combined. That cap includes deductions for the amount of money people pay in local property taxes, state sales taxes as well as income taxes for those individuals that work outside of Nevada.
Will Capping Sales Tax Deductions Harm the State's Bottom Line?
Honestly, we don't know.
In earlier drafts of the bill, the deductions were eliminated. According to the report "analysts have suggested that if the House or Senate provision to eliminate the state and local general sales tax deduction prevails, and taxpayers choose to take the standard deduction, one possible outcome is decreased consumer spending in the state."
However, now that the deduction is capped instead of eliminated, there is uncertainty on how it will affect the state.
Eliminating the Individual Mandate Penalty is a Mixed Bag.
Eliminating the individual mandate penalty will likely help lower taxes on lower-income individuals in Nevada which will result in real tax relief for individuals.
At the same time, eliminating the penalty removes much-needed money from the insurance risk pools. Removing that cash could lead to increase in insurance premiums on both individuals and employers as a whole.
Eliminating the mandate penalty may also create problems in the healthcare marketplace especially in rural areas. In many parts of Nevada, there is only one provider in the marketplace, and without the mandate and its subsequent penalty that provider may leave those areas.