American taxpayers may get a jolt on New Year’s Day when new tax rules — including some sudden tax increases — take effect just days after Republicans hope to pass their overhaul and have it signed into law.

In an effort to juice the economy with tax cuts ahead of the midterm elections, the GOP is planning a Jan. 1 start date for its sweeping rewrite of the code.


But along with Republicans' much-advertised cuts in business and individual taxes, there would be tax increases as well, some of which have been barely debated.

Some people who sell their homes may find they owe thousands more in taxes; investors could pay more when they sell stocks; and undocumented immigrants could find themselves cut off from a popular child tax credit Republicans plan to expand.

Fringe benefits for workers such as subway passes and help with moving expenses will

likely no longer be deductible, which might prompt companies to drop them.

Payroll administrators worry they won’t be able to make changes to tax withholding by the first of the year, and both large and small businesses may face altogether new tax rules that many scarcely understand.

Those overnight changes would leave the public little time to adjust, critics say, and highlight a downside to Republicans’ rapid-fire approach to rewriting the code.

After stunning Washington by moving their plans through the House and Senate in a matter of weeks, they’re poised to send President Donald Trump a final plan to sign into law next week. Lawmakers hope to reach a deal on a compromise plan between the two chambers as soon as Tuesday.

Most of their plan would take effect soon thereafter, with Republicans saying they are eager to move on to the new system.

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“People are sick of this current tax code,” said House Ways and Means Committee Chairman Kevin Brady (R-Texas), one of the architects of the plan. “The sooner we get these cuts in place, and the sooner we have a modern tax system for our local businesses, the better.”

But some experts see big risks in the quick turnaround.

“I’m not so sure the rush actually benefits Republicans very much, and it has the potential of creating real implementation problems,” said Howard Gleckman, a senior fellow at the nonpartisan Tax Policy Center.

Typically with major legislation, lawmakers provide a transitional period where they phase in changes in order to give the public time to prepare for things that will directly affect them.

The Affordable Care Act, for instance, had a series of rolling deadlines for when various taxes, coverage requirements and provisions would take effect. The landmark 1986 tax reform included scores of provisions phasing in controversial changes.

Lawmakers are mostly skipping that playbook, though, as they eye the 2018 elections. They believe the combination of a dramatically lower corporate tax rate, a long-awaited repatriation of companies' overseas earners and tax cuts for individuals will give a boost to voters heading into next year’s elections.

Overall, under the plan, millions of people’s take-home pay would increase and businesses would have a lot more money.

People wouldn't necessarily have to wait until 2019, when they file their taxes, to take advantage because they could increase their take-home pay by adjusting home much tax is withheld from their paychecks.

Most corporations and unincorporated “pass-through” businesses, meanwhile, could adjust their so-called estimated taxes, which are periodic payments made throughout the year.

The Republican plan would boost growth next year by 0.7 percent, the Tax Policy Center reported Monday, by putting more money in the pockets of both individual taxpayers and businesses. That was the single-biggest annual increase the group saw the proposal having over the next decade.

But if Republicans make those individual and business tax cuts apply immediately, it’s hard not to do the same with the tax increases.

“If you don’t synchronize those with the effective date of the tax cuts, then you have a funding gap, because that means you’re going to have the benefits without any of the pay-fors for a period of time, so it makes the numbers harder to work,” said John Gimigliano, a former Republican tax aide now at the consulting firm KPMG.

Some people could feel blindsided by the looming changes.

Both the House and Senate, for example, want to require people to own their homes longer before they can sell them without having to pay capital gains on any increase in value. Currently, they must be in their homes for two of the past five years in order to qualify, but lawmakers want to up that to five of the past eight years.

“It can mean the difference between thousands and thousands of dollars in tax, or not,” said Evan Liddiard, director of tax policy at the National Association of Realtors. “People are going to have to be ready to shift to a new world.”

People claiming the hugely popular child tax credit could have to begin producing a Social Security number for their child, a proposal designed to disqualify undocumented immigrants from taking the break.

Both multinational corporations and pass-through businesses, which pay taxes through the individual side of the tax code, could face complex new tax rules on Jan. 1, even though it would take the Treasury Department months if not years to spell out the details of how exactly those new regimes would work.

“Obviously there is a strong political desire to have the tax reform bill, particularly, the rate reductions, go into effect as soon as possible,” said Marc Gerson, a former tax aide who is now a lawyer at Miller & Chevalier. “There are practical limitations, however on the ability of taxpayers and the Internal Revenue Service to implement such a comprehensive change to the tax system in such a short time period.”

The American Payroll Association, meanwhile, warned lawmakers last week that its members “are starting to panic, on behalf of themselves and millions of employees, about the effect on 2018 withholdings of a tax bill that will be effective a week after its enactment.”

Brady says lawmakers will add transition rules easing in changes in “some of the most complex areas like international” corporate tax changes, without providing specifics. That could be tricky, though, because delaying tax increases costs money, which could throw off lawmakers’ budget numbers.

“The transition rules, depending on how they’re written, can be expensive,” said Gimigliano. “But if they can make the numbers work, it certainly eases the pain in terms of transitioning into the new system.”

