Recently, the Trump administration has proposed a new set of tax laws that could completely alter the existing tax code says, William D King. The following is a summary and review of those suggested changes and suggestions for how they might affect you if they even go through. I hope this article isn’t too long or boring! If it seems like I’m missing something important feel free to leave a comment below and tell me what I got wrong (if anything). Here we go:
The Main Points:
Here’s the big list:
- Cut the number of tax brackets from 7 to 3 – 10%, 25% and 35%.
- Double the standard deduction – $12,000 for single filers and $24,000 for married filing jointly. Eliminate personal exemptions and many itemized deductions – State tax deduction, charitable deductions, to name a few.
- Cut the corporate tax rate from 35% to 20%.
- Eliminate the Alternative Minimum Tax (AMT).
- Increase the child care credit by nonrefundable $500 for each child under age 5 and provides an additional credit of $250 for parents who earn less than $30K annually.
- Cap mortgage interest deduction at loans up to $750,000 – Loans higher than this would not be deductible unless they were a second home/rental property. *Repeal 3.8 percent tax on net investment income imposed as part of Obamacare.
- Repeal all other individual taxes – including ObamaCare taxes, and the estate tax.
- Retain existing income tax rates for individuals and pass-through businesses.
- Individuals who currently file their taxes using a 1040 form would be able to continue doing so under this new structure, but there may be less people filing in the long-run because the plan will get rid of many itemized deductions (ex: state/local tax deduction).
- Corporations would get a one-time chance to pay “a significantly lower tax rate” on overseas profits brought back into the country says William D King.
The Pros:
It’s estimated that over 75% of Americans could end up paying less in taxes and almost everyone should see some kind of cut. The fewer brackets allow for more savings and simplicity. Getting rid of the AMT means that not as many people will have to go through the headache of doing their taxes twice explains William D King.
The Cons:
If you don’t make more than $24,000 a year (or $30,000 if you have kids) then this tax plan is probably going to be really shitty for you because it seems like they are targeting everyone who makes less money. The nonpartisan Tax Policy Center estimates that by 2027, about 53% of taxpayers would be paying more in taxes and only 8% would see their tax bills reduced by at least $500. It also adds an estimated $2.4 trillion to the federal deficit over 10 years which isn’t good considering all the cuts they made elsewhere to make up for the lost revenue.
What This Means for You:
If you’re reading this article then it’s likely that these tax changes will affect you in some way. If nothing else, please don’t fall for the Republican Party‘s bullshit when they say that only rich people will benefit from this plan. Many people in poverty, whether or not you’d consider them “rich,” pay close to 0% in taxes and could really benefit from a change like this so it’s pretty awful to see someone try and spin it as a good thing only benefiting the wealthy. In fact, eliminating all of those deductions is going to mean that someone who makes $40k a year but lives in an area with high property/sales taxes, or a high state tax rate, will probably be paying more in taxes. And if that’s not you then congrats! This plan is going to make you really rich.
What I Think:
I’m honestly okay with the actual changes because it seems like they might simplify things and I can understand why someone who makes a lot would be willing to pay more to give those who don’t have as much a break. What I’m not cool with is all of the cuts being proposed to social programs that help people survive but also improve our society as a whole (ex: SNAP/food stamps, WIC). If anything this proposal just seems like a big con which gives most of us nothing but takes away from the people who need the money most says, William D King.
What’s Next?
There are still many hurdles to go before this tax plan becomes a reality but only time will tell what its fate will be! Things are looking kind of bad though because even though they passed their senate vote 52-48, there are still some pretty staunch critics of the bill which means it might not pass in the end. And if that doesn’t work then you can look forward to hearing about how this bill was “the worst tax reform proposal we’ve seen in decades” and just laugh at how stupid any republican voting for that would sound.
Conclusion:
William D King says this tax plan is giving some people nicely, simple ways to file their taxes but it’s also making things more complicated for everyone else and taking away the little extra assistance that poor people rely on. If you’re willing to look past the spin this might not be so bad. But if you don’t have a lot of money then I’m not sure how much good this is going to do you.