The Tax Cuts and Jobs Act, otherwise known as the Republican tax plan was approved by Congress and the Senate this week. It always shocking to me just how much political hysteria surrounds any discussion on federal income taxes. Unfortunately, the federal income tax has long ago morphed from a method to simply fund the government’s operations into a mechanism of social engineering.

In my experience the tax code is actually the primary way most Americans actually interact with the federal government. And in this regard this law makes some material changes. I’ll grade them in this column, and do my best to repress my politics.

In my opinion the tax code needed to be simplified, I believe the federal government takes more than its fair share of the total tax dollar (state, local, federal) and I believe the current corporate tax system is downright disparaging to the health of many businesses, large and small, so these issues will serve as the foundation for my grading scale. I will also use my family and the hundreds of clients I work with here in Northwest Indiana as the prism to view it.

First, simplification. Most families I work with save stacks and stacks of papers in an effort to itemize deductions on their federal return. This process is tedious and sometimes leads to expensive accounting bills. The new tax plan increases the standard deductions for a couple to $24,000. Very few families I work with have itemized deductions over this amount. Most will probably still save their stacks of paper for a year or two until they understand the change, but over time I believe the tax return process will get easier for most.  

On the other side of the simplification coin, the current tax code has seven tax brackets as income rises. The new tax plan also has seven brackets as income rises. This is absurd and confusing, and makes tax planning very difficult for business owners like myself. So, in total, the simplification grade can be no higher than a "C-plus."  

On the overall amount of money the federal government takes from us in income taxes versus other tax authorities the new plan makes some bold statements. It limits the amount of state and local taxes that can be deducted (see the standard deduction discussion above) and only nominally reduces tax rates in its ridiculous seven brackets.  

By my math a couple with $100,000 in income (no children counted) with a typical level of itemized deductions for this income level (mortgage interest, state and local taxes, charity) of $18,000, would see their federal income taxes reduced from roughly $10,700 to $10,000. While $700 is $700, I’m not planning a trip or buying a new truck because of it. In my opinion this is still too much money being diverted to Washington D.C. from our local communities where it is earned, so I give it an openly biased “C."

Where this plan really makes a difference, and “re-complicates” itself is in the area of business taxes. Without doing a deep dive I can tell you the current tax code makes it very difficult to run a healthy business. Retained earnings are heavily taxed, which cause companies to do all kinds of aggressive tricks to discharge this income. Prudent small businesses need to manage their money just like prudent households and the current tax system makes this very difficult. The new law, while still complicated, provides much more incentive for companies to maintain a healthy balance sheet and to make capital investments which could spur economic activity. So, while the complication of the new business tax code reduces the grade a bit, I have to give it a solid "B."

So, two Cs and a B. If my 14-year-old brought these grades home there would be trouble, but for the government I’ll take what I can get. Not a game changer, but better than what we had.  

Opinions are solely the writer's. Marc Ruiz is a wealth adviser with Oak Partners and a registered representative of Sll investments, member FINRA/SIPC. Oak Partners and Sll are separate companies. Contact Marc at marc.ruiz@oakpartners.com.

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