Based upon his campaign promises, and backing by the GOP, the following is a brief outline of what Trump’s tax plan means to you!
On November 16, 2017, the U.S. House of Representatives passed its version of the Tax Cuts and Jobs Act. That same day, the Senate Finance Committee approved its version. The Senate will vote on its plan by December 1. Both plans are based on the Trump administration's plan presented on September 27, 2017.
So, what Does This Mean for you?
Wealthy Americans, including President Donald Trump, stand to benefit handsomely from the tax plan, thanks to proposals to eliminate the estate tax and the alternative minimum tax, among others.
As it stands, take-home pay could increase — albeit slightly — for most Americans under the tax plan.
We were curious how it might change, so we ran some numbers using the current proposal.
The estimates in the chart show how much single, childless taxpayers at different income levels who claim the standard deduction might save if the bill becomes law:
$25,000 salary: estimated annual tax savings of $202.
$75,000 salary: estimated annual tax savings of $2,078.
$175,000 salary: estimated annual tax savings of $4,289
Income Tax Brackets
The Senate plan keeps the current seven income tax brackets but lowers some tax rates. These rates will revert to the current rate in 2025. Until then, it creates the following tax chart.
Both tax plans eliminate itemized deductions except for those for charitable contributions, mortgage interest, property taxes, and retirement savings. Current mortgage-holders aren't affected by either plan. The House plan limits the deduction up to $500,000 for new mortgages. That would affect just 6 percent of mortgages, mostly in large cities.
How It Affects You
The Senate plan would help businesses more than individuals. Through 2027, business taxes would be lower overall. But individual taxes at every income level would increase by 2027.
Among individuals, it would help higher income families the most. Everyone gets a tax cut in 2019. But in 2021, taxes will increase on those making $30,000 or less. By 2023, costs will rise on everyone who makes less than $40,000 a year. The tax cuts expire in 2025. As a result, all income levels will pay higher taxes in 2017. The tax increases are due to loss of deductions. That's according to the most recent analysis of the Senate plan by the Joint Committee on Taxation.
The Tax Policy Center found that taxpayers earning in the top 1 percent would receive a larger percent tax cut than those in lower income levels. By 2027, those in the lowest 20 percent would pay higher taxes.
The Tax Policy Center estimated the House bill would impose higher taxes on 31 percent of middle-class households in 2027.
Both plans increase in the standard deduction will benefit 6 million taxpayers. That's 47.5 percent of all tax filers, according to Evercore ISI. But that's not enough to offset lost deductions for many income brackets.
Neither plan helps the lowest-income families. That's because more than 70 million Americans don't make enough to pay taxes. The plans also don't help the third of taxpayers who have incomes that fall below current standard deduction and personal exemptions, according to New York University law professor Lily Batchelder.
Both plans increase the deficit by almost $1.5 trillion over the next 10 years. Budget-conscious Republicans have done an about-face. The party fought hard to pass sequestration. In 2011, some members even threatened to default on the debt rather than keep adding to it. Now they say that the tax cuts would boost the economy so much that the additional revenues would offset the tax cuts. They ignore the reasons why Reaganomics would not work today.
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