Camelot Portfolios Talking Points

Tax Bill Passes House and Senate

After months of deliberation, both legislative bodies passed the tax overhaul bill. With initial outlines from the president to considerably reform major parts of the tax code, the house and the senate crafted each of their own versions of what tax reform looks like. After debating and compromise, the final tax bill still results in substantial changes in the tax code.

The tax bill was voted on along party lines in both chambers. In the house, 227 Republican representatives voted for, 192 Democratic representatives voted against, and 13 Republican representatives voted against the bill (Govtrack). The 13 Republican representatives who voted against the bill were from “high tax” states (Govtrack). In the Senate, 51 Republican representatives voted for the bill, 48 Democrats voted against, and 1 Republican, John McCain, was absent due to cancer treatments (Govtrack).

Beginning in 2018, individuals and married filing joint tax returns will see the following changes to their tax structure:

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This updated tax structure keeps the existing number of tax brackets, seven, but shifts the ranges of taxable income. The other major change made on the tax brackets is the adjustment by chained CPI (House of Representatives). This adjustment is considered a better representation of inflation but tends to be lower than traditional CPI (Kitces).

Along the lines of tax deductibles, there will be changes in effect to what people can deduct in 2018. The following changes will be in place next year compared to current law:

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While these deductions will start taking effect in 2018, there were other provisions for taxpayers that are not revised from the current law. The FIFO treatment of investments was not included (Kitces). This means investors have a choice with which method to sell out of investment positions. Other deductions and credits that remain intact are school teacher deduction, electric vehicle credit, and dependent care credit (Kitces).

Looking at changes to education deduction and expenses, there have been considerable reforms to 529 plans and student loan treatment. 529 education plans have now been expanded to include private schooling, limited to $10,000 per year and student (House of Representatives) (Kitces). Also, homeschooling expenses are covered under this as well (House of Representatives) (Kitces).

Flipping over to business and corporate tax, major reforms will be enacted in 2018. The most notable changes is the corporate tax rate is reduced to 21% from 35%, alternate minimum tax rate is repealed, immediate expensing on certain equipment, and repatriation of cash and non-cash holdings at 15.5% and 8% respectively (Bloomberg) (House of Representatives).

Although this tax bill makes substantial adjustments across the tax spectrum, estimates from congress believe this will continue to burden future congressional budgets. According to the congressional business office, the federal deficit will increase by $1.414 billion over a ten year period (2018-2027) (CONGRESSIONAL BUDGET OFFICE ). The majority of revenues lost over this time span is from individual tax provisions (CONGRESSIONAL BUDGET OFFICE ). The majority of the lost revenues is weighted towards the near future with large estimated deficits in 2019 and 2021 (CONGRESSIONAL BUDGET OFFICE ).  While these estimates only take into account revenue lost from taxes, future adjustments to cutting programs are needed to neutralize the budget.

Overall, the new tax bill does leave complexity in place and reduces taxes for the majority a current taxpayers. There are exceptions to the bill, but simplification of the tax code did not seem to take precedence in areas of the tax code.  Taxpayers will have to wait till next year to see if the law does improve upon current tax law.


Compiled by the Camelot Portfolios Investment Committee

Darren Munn, CFA, Chief Investment Officer

Paul Hoffmeister, Chief Economist

Eric Kartman, Research Analyst

Drew Steinman, CPA, Trader/Research

Zach Hartenburg, Trader

Frank Echelmeyer, MBA, CKA®, Advisor Consultant

-for Broker/Dealer and RIA use only-



Bloomberg. The Major Tax Changes in the Republican Bill. 2017.

CONGRESSIONAL BUDGET OFFICE . "Cost Estimate." November 2017. Congressional Budget Office. December 2017.

Govtrack. Voting Records. December 2017. Web. 2017.

House of Representatives. "TAX CUTS AND JOBS ACT." December 2017. December 2017.

Kitces, Michael. Individual Tax Planning Under The Tax Cuts And Jobs Act Of 2017. 2017. 2017.


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