H.R.2621 - Reward Each American’s Labor And Make Every Rich Individual Contribute Again Act; REAL AMERICA Act (119th Congress)
Summary
H.R.2621, the REAL AMERICA Act, proposes several amendments to the Internal Revenue Code of 1986. Key provisions include deductions for cash tips and qualified overtime compensation for individuals earning under $450,000 (or $900,000 for joint returns), and the repeal of including social security benefits in gross income. The bill also addresses partnership interests, particularly concerning investment management services, aiming to recharacterize certain capital gains as ordinary income and modify rules for carried interests.
Expected Effects
If enacted, the bill would alter the tax liabilities for many Americans, especially those receiving tips or overtime pay. It would also significantly change the tax treatment of income derived from investment partnerships, potentially increasing taxes on investment managers. The bill also includes provisions to hold Social Security trust funds harmless from the repeal of taxing social security benefits.
Potential Benefits
- Lower taxes for tipped workers and those receiving overtime pay, increasing their disposable income.
- Simplification of tax filing for seniors by eliminating the inclusion of social security benefits in gross income.
- Potential for increased tax revenue from investment partnerships due to the recharacterization of capital gains as ordinary income.
- Incentivizes overtime work by allowing a deduction for qualified overtime compensation.
- Clarifies and updates rules regarding partnership interests transferred for services, potentially reducing tax loopholes.
Most Benefited Areas:
Potential Disadvantages
- Increased complexity in the tax code due to new deductions and rules for overtime compensation and partnership interests.
- Potential for reduced tax revenue due to deductions for cash tips and overtime compensation, requiring offsetting measures or increased deficits.
- Possible negative impact on investment in partnerships if the tax treatment becomes less favorable.
- The income limitations on deductions may create a 'cliff effect,' where individuals slightly above the income threshold receive no benefit.
- The changes to partnership taxation could disproportionately affect certain investment strategies and industries.
Most Disadvantaged Areas:
Constitutional Alignment
The bill primarily concerns taxation, which falls under the powers granted to Congress in Article I, Section 8 of the Constitution, which provides Congress the power to lay and collect taxes, duties, imposts and excises. The bill does not appear to infringe upon any specific constitutional rights or protections. The appropriations to the Social Security Trust Funds are consistent with Congress's power to provide for the general welfare.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).