Tax reform 2017: here’s when the proposed Republican plan will take effect

Changes will happen immediately.

Now that congressional Republicans have passed their massive tax bill, Americans will feel the impact quickly.

Republicans passed their tax package in the early hours of Wednesday morning. Now the bill will head to President Donald Trump’s desk, though there’s a possibility it won’t get the presidential signature until January.

Regardless, the bill’s statutory language means it will go into effect on January 1, 2018. The sweeping overhaul of taxes will reduce rates for corporations and individuals (although individual tax cuts would eventually expire), and will repeal the Affordable Care Act’s individual mandate, effectively kicking 13 million people off their insurance, according to the Congressional Budget Office.

But Americans won’t see a big difference in their tax return when they sit down to file this spring; the proposed cuts in the bill will show up when most people file in April 15, 2019.

“When they’ll really see the difference is a year from March and April,” said Marc Goldwein, senior policy director for the bipartisan Committee for a Responsible Federal Budget.

Still, the current proposed tax bill will make more immediate changes, including to the amount of money employers withhold from their paychecks for tax purposes.

Beyond proposed cuts that will show up in people’s tax returns, there are much bigger implications and changes taking place down the line. As written, the Republican tax bill will cause a $1 trillion increase to the national deficit over the next decade and let individual tax cuts expire after 10 years, meaning taxes on the middle class would eventually go up. Furthermore, some Republicans are advocating the idea of raising tax rates if the tax bill doesn’t produce enough economic growth to stave off a deficit increase.

It’s hard to predict exactly how this would impact everyday Americans, but tax experts can say a few things with certainty: Older, wealthier Americans are going to benefit in the long run, while young Americans who work are going to be left footing the bill for years to come.

“I don’t think people are going to wake up on January 1 and see that their lives have changed in a huge way,” said Eric Toder, co-director of the Urban Institute’s Tax Policy Center. “It’s going to be a while before the full impact of this reveals itself.”

Earlier this month, Business Insider ran an analysis to estimate how much savings individual earners would see under the House GOP tax bill. They estimated that a single, childless taxpayer making $25,000 per year would see an average of $200 in savings, a taxpayer making $75,000 annually would see about $2,000 in yearly savings, and a taxpayer making $175,000 per year would see about $4,200 in savings.

But unlike the original House plan, the plan the House and Senate agreed on and passed this week would see those individual tax cuts eventually expire, while corporate tax cuts stay permanent.

“Basically, the individual income tax reverts to current law for tax year 2026 and beyond,” Goldwein said. “People get eight years of tax reform.”

Like the health care bill, the tax bill favors older, wealthier people

With the corporate tax rate getting slashed from 35 percent to 21 percent and staying permanent, corporations are the big winners under a GOP tax bill. But on the individual side, older and wealthier people are also going to get a victory. Multiple analyses show that poorer Americans will lose out under the bill, because individual tax cuts will eventually be phased out and the individual mandate will be repealed, causing an estimated 13 million people to lose health insurance, according to the nonpartisan Congressional Budget Office.

As Vox’s Dylan Matthews reported:

The CBO breaks down the billions of dollars in annual changes to spending and tax revenue by income group, up to people making more than $1 million. What they find is that while the rich as a group benefit each year (as do people making more than $75,000, on aggregate) the desperately poor, earning $10,000 or less a year, lose out consistently — and by 2021, people earning $40,000 a year or less start losing out as well.

Corporate tax cuts will trickle down to shareholders and investors, and therefore be a boost to older, wealthier retirees who make their money off investment earnings rather than wages. Younger people, and people who must work for a living, will eventually see their tax cuts expire and will have to deal with consequences if the national deficit grows.

“There’s a redistribution of burden from the old to the young,” Toder said.

Future generations stand to lose much more, especially if the tax plan balloons the national deficit as much as it’s projected to. Eventually, someone is going to have to pay for the cost of the steep tax cuts, whether that’s through increased future taxes, cutting spending or entitlement programs, or a mix of all three.

“One way or another, those tax cuts are going to have to be paid back, [and] it’s going to be skewed towards future generations,” Goldwein said. “If I’m a betting man, I don’t think it’s going to turn out well for the poor. But all I can say with certainty is that younger generations are going to pay more relative to how much they’re getting in the tax cut.”