The Republican tax plan has passed the Senate and will now go to conference with the House before landing on President Trump's desk. Video provided by Newsy Newslook
Depending on which Tennessean you ask, the Republican tax bills passing through Congress could be a godsend for economic prosperity or might harm the nation's trajectory and further deepen its income divide.
At the crux of the debate is how, over time, a significant cut in the corporate tax rate and changes to the individual tax structure will impact the federal deficit, wages, incomes and large government programs, such as Medicare.
► Poll: Tennesseans disapprove of tax plan, fear changes won't help middle class
Tennessee Economic and Community Development Commissioner Bob Rolfe is confident the corporate tax cut — lowering the standard rate to 20 percent from 35 — will improve the economy by freeing up more capital for investment and by attracting more companies to the U.S.
"It is going to open up additional international foreign direct investments," Rolfe said. "You cut your corporate income tax in half, that leads any and all companies to take whatever the number is to reinvest in the company, the equipment, the product lines, the employees. We think it will be an enormous win."
► How the Republican tax plans might impact: A middle-class family | A graduate student | A small business owner | A school teacher
Nashville business leaders have also emphasized the importance of a corporate tax cut for small business growth. Nashville Area Chamber of Commerce CEO Ralph Schulz urged Tennessee senators to support a corporate tax cut.
President Donald Trump's Council of Economic Advisers forecasts that a corporate tax cut could yield $4,000 to $9,000 in income gains for the average U.S. household. University of Tennessee at Knoxville tax economist Matthew Murray said those estimates are likely too high.
“Might workers get paid a little more? Yes, that is very, very possible," Murray said. "Would they get a $4,000 to $9,000 pay increase? I don’t think any economist I know believes that would be the case."
► More: Could the tax bill boost Tennessee's population? Haslam says yes
Tennessee has a 3 percent unemployment rate, a record low, and filling skilled positions is already a challenge for many Tennessee business owners, which complicates job growth projections, Murray said.
"If businesses got more income, I'm not sure they could find the workers," Murray said.
The proposals are still being tweaked and many question marks loom around which specific deductions will endure. But with the main elements of the House and Senate versions in place, some Tennesseans — a business owner, a graduate student, a teacher and a family — are considering how the bill will affect them.
Local economics, not federal tax changes, guide growth, business owner says
Bob Bernstein, owner of coffee shops Bongo Java and Fido, has little faith in trickle-down economics, which is how he views the current tax proposals. While some small business owners could see a reduction on the amount of income they are taxed on, Bernstein is skeptical that the proposals will impact his profitability or his business decisions.
"It is not going to affect whether we grow our business or not," Bernstein said. "Very slightly, it may affect some salaries."
Instead, local business factors — Nashville's growing customer base and the influx of new, competing restaurants — have the greatest influence on how he will grow operations. Bernstein recently opened BOX coffee shop in 12South and is planning multiple cafe concepts across Nashville.
"What is driving my profitability is the growth of Nashville, both the good and the bad," he said. "From what I understand in this tax bill, it's not going to be anywhere drastic enough for me to rethink what we do around here. Way more important is local economics."
A graduate student rethinks his future
Adam Gottlieb, a Vanderbilt University master's student in education policy, wants to get a Ph.D.
“This bill would make that impossible,” he said.
Gottlieb is eyeing the House version of the federal tax plan and its impact on graduate students’ tuition waivers — free or reduced tuition based on work done for a school in research or teaching.
By far, the taxes proposed against tuition waivers are the most significant to higher education students, according to national experts.
The waiver works by a university covering a portion of the cost to educate a student for research or teaching done at the university. The university will pay a stipend to the student — taxable — as well as cover tuition that in the past has been untaxed.
► More: Here's why college students could pay more in the Republican tax bill
The House tax plan calculates the tuition, placing students into a higher tax bracket, said Christopher Marsicano, a Vanderbilt Ph.D candidate with a focus on higher edudcation, politics and policy.
"It's not like (it) is free money and someone waves a magic wand and it disappears," Marsciano said. "Up until now that wasn’t considered taxable. It was exempt."
David Butler, Middle Tennessee State University dean of graduate studies, said all eyes are on what Congress decides.
"Everyone is waiting with bated breath on whether this tax provision is included or excluded," Butler said.
Butler said it could have a severe impact on the health of the region's economy. It might deter many students from pursuing advanced degrees, such as Gottlieb.
And there is a need for workers with master's and doctorate degrees in Middle Tennessee, Butler said. More than 1,000 additional workers a year with advanced degrees will be needed by 2020 in the region, he said, and those workers make higher wages and have skills valuable to companies.
"Our concern is we provide a majority of the workforce for Middle Tennessee, and we don’t want the economy, which the university is participating in a dynamic way, to be harmed by a piece of the bill," Butler said.
Gottlieb said he is in a tough position. His education is already expensive and is looking even more expensive. For him, it may not be worth the cost.
“My two-year master's is being paid for entirely by federal loans and paying that off will be a multi-decade process,” Gottlieb said. “At this point, I think I may just find a good job with options for movement and forego the Ph.D.”
A teacher faces uncertainty over tax credits
Nashville public school teacher Amanda Kail spends hundreds of dollars on her students each year. It’s the same for her colleagues at Margaret Allen Middle School.
“Our schools do supply some, but the reality is we do spend a good deal of money on many basic things,” Kail said.
That list includes copy paper, notebooks, pencils, Band-Aids, Kleenex and hand sanitizer.
“Teachers really do shell out a lot of money for things that you don’t even really ever think about,” Kail said.
► Poll: Most Americans doubt GOP bill will cut taxes or boost economy
So the prospect of losing a $250 classroom supply tax break for teachers that buy items for their students has many Metro Nashville Public Schools teachers on edge, Kail said. The House bill wipes away the teacher supply credit entirely, while the Senate bill doubles the credit.
But the possibility of losing the credit is a slap in the face to teachers, Kail said.
She said in the grand scheme of things, the tax credit isn’t much. The state provides teachers $200 a year for classroom supplies. But she said the credit is at least a small way to recoup a portion of the hundreds of additional dollars spent providing for the well-being of children.
“Public school teachers are, by and large, one of the largest groups that take care of kids who live in poverty,” she said. “That is really where find ourselves. If we expect people to do that, we need to provide resources for them.”
Tax plans could have big impact on families with children
Kristy Brown is an attorney. Her husband, Andy, is a CPA.
He's a man who understands numbers, but he doesn't do personal taxes.
"Except ours," Kristy Brown said with a laugh.
So, like many Middle Tennessee families, the Browns are doing their best to understand exactly how the proposed tax plans will impact them.
They have two kids, a 3-year-old girl who has decided she wants to become a ballerina, and a sports-obsessed 7-year-old boy who loves the Predators and recently mapped out all the different college football ranking scenarios.
They like to go to the library together, or the Frist or the Adventure Science Center. To take in the city as much as possible together.
As a middle-class family of four living in Brentwood, they could benefit from proposed changes like an increased child tax credit.
But the Browns also itemize their taxes, and the possible elimination of deductions for state and local taxes would be a negative impact.
"It seems like it changes by the day," Kristy Brown said of the plan, "and it's also hard to keep up because there's two different versions."
► More: Nine differences between the House and Senate tax plans
And even though young Evan is a numbers guy like his daddy, he will be no help here.
Many analysts have estimated the tax plan’s impact on household finances with examples of how “typical” families would stand to gain or lose — but “typical” can be a challenging word because of the diversity of people’s financial and personal situations.
Different types of families would be affected in different ways.
But with changes to the child tax credit, a lot of families, potentially could benefit.
Under the House version, the child tax credit jumps from $1,000 to $1,300; under the Senate version, that goes up to $2,000 per child.
The benefits do start to phase out above a certain income level.
Benefits also hinge on whether a family claims a standard deduction or itemizes their taxes.
Nearly 70 percent of Americans claim the standard deduction — which replaces most of those specialized tax breaks with a single lump sum — according to data from the IRS.
High-income earners are more likely to itemize instead, taking advantage of specialized deductions for sales taxes, interest paid on a mortgage, charitable donations, medical and dental expenses and more. But they aren't the only ones who do so.
The tax plan would do away with or limit many deductions, which could increase federal taxes for families who itemize their deductions.
The House and the Senate have passed different versions of President Trump's tax reform bill so now it goes to a conference committee. Here's what that means. USA TODAY
Even with one elementary school student and one child in day care, the Browns don't currently qualify for the child tax credit. They are phased out because of their income level.
One of the versions of the new tax plan would change that for them, giving them a child credit they don't now receive. The other wouldn't.
If the deductions for state and local taxes are taken away, the Browns likely would no longer itemize their taxes. But it's hard to know how that would impact them, particularly if the standard deductions are increased as also proposed.
The Senate bill would roughly double the standard deduction, increasing to $12,000 for an individual or $24,000 for married couples.
"I think the way with any legislation, there are so many moving parts," Kristy Brown said.
If there was extra money that came out of this, the Browns would plan to save it. "Put it in our rainy day fund," Kristy Brown said.
With two young kids, one never knows when that will come in handy. But right now, Kristy believes it's too complicated to completely know how it will impact her family — or any other.
"There's not really a 'typical' family, and it's really going to be like the health care bill," she said. "We’re going to have to see what happens, once it happens. What did we lose what did we gain?
"Right now it feels like too much is going on to even try to figure out what it’s doing."