How Much Will You Pay Under Trump’s Tax Plan?
Spoiler alert: Those in the top 1% are the big winners.
Last week, details emerged of the Republican Party’s proposed tax reform plan that aims to shake up the current federal tax bracket system. At present, there are seven federal tax brackets, which begin at 10% and top out at 39.6%. The Republican plan, championed by President Trump, will reduce that number to three: 12%, 25%, and 33%. This bracket reshuffling means that some in the working and middle class will get breaks, others will pay more, and the undisputed winners will be those in the top 1%.
Here’s a simple guide to the proposed new brackets by How Much.
“Some taxpayers would definitely benefit from Trump’s tax reform — especially those at the higher end of the income scale. There are others, however, who would see their tax rates go up. Especially those on lower incomes,” according to How Much. But there is more at play in Trump’s plan than just new brackets. “The graph does not take into account other aspects of the Trump tax plan not directly related to the changes to income tax bands, such as the increase of standard deductions and a cap on itemized deductions.”
The proposed tax plan aims to double the standard deduction, which at first glance, appears to be a big win for working and middle-class families. But that will be met by the elimination of many deductions, which could raise some of their taxable income. ”Currently, single taxpayers can claim a total of $10,400 in standard deductions, plus personal exemptions. The boost to $12,000 will still lead to a reduction of $1,600 in taxable income, but that’s a whole lot less than what the near-doubling language would suggest,” according to the Motley Fool said.
Per the Tax Policy Center (TPC), the Republican plan would result in a huge shift in the tax burden from top earnings to middle- and working-class people over a decade. According to Forbes, “TPC projects, 80% of the dollar value of the tax cut would go to the 1% and 40% of the benefit to the 0.1%. Meanwhile, 60% of families earning $150,000 to $300,000 and nearly 30% of those earning $50,000 to $150,000 would pay more under the Trump plan than under current law.”