A standard selling point for the GOP’s tax overhaul plan is that middle class Americans will get a big tax cut and see their wages go up because of a slash on the rate paid by corporations.
Republicans are doubling the standard deduction and the child tax credit, lowering tax rates across the board until 2025 and giving businesses a permanent break to spur job creation.
Treasury Secretary Steve Mnuchin said Sunday on CNN that a two-parent family with two children making $75,000 would keep $2,000 more a year and a family of four with a combined salary of $150,000 would get twice that.
‘It’s going to be one of the great Christmas gifts to middle-income people,’ President Donald Trump on Saturday said.
A standard selling point for the GOP’s tax overhaul plan is that middle class Americans will get a big tax cut and see their wages go up because of a slash on the rate paid by corporations. But an estimated 13 million Americans are projected to lose health insurance
But the bill creates plenty of losers, too.
An estimated 13 million Americans are projected to lose health insurance. Commuters will no longer receive a perk that has saved them money. Some residents of high-tax states like New York, New Jersey and California will pay more because of a change to the state and local tax deduction.
THE TRUMP TAX BRACKETS
$0 to $9,525 – 10%
$9,525 to $38,700 – 12%
$38,700 to $82,500 – 22%
$82,500 to $157,500 – 24%
$157,500 to $200,000 – 32%
$200,000 to $500,000 – 35%
$500,000 and up – 37%
Married couples who file jointly
$0 to $19,050 – 10%
$19,050 to $77,400 – 12%
$77,400 to $165,000 – 22%
$165,000 to $315,000 – 24%
$315,000 to $400,000 – 32%
$400,000 to $600,000 – 35%
$600,000 and up – 37%
And millions of American households could face tax hikes in coming years. That’s because their new tax breaks are set to expire within the next decade. Their taxes could also creep up because the IRS has been directed to use a less generous gauge of inflation in adjusting tax brackets.
Republican lawmakers have sold their far-reaching legislation as benefiting everyone in the long run because, they argue, it will speed up economic growth.
Yet, most economists say that any boost in growth would be modest in the long term. And most argue that at least some of the tax benefits will be undermined by the much higher budget deficits that help pay for them.
Most Americans would receive tax cuts initially.
By raising the standard deduction to $12,000 for individuals and $24,000 for joint filers, Americans who choose not to itemize will pay no taxes on income up to that amount.
An increase in the child tax credit from $1,000 to $2,000, of which $1,400 is refundable, is another major middle class benefit.
But lower income tax rates and a host of other benefits would expire after 2025. This effectively sets up an $83 billion tax hike for many millions of Americans in 2027.
What’s more, people’s taxes could continue to inch up because the plan will adjust the tax brackets at a less generous measure of inflation than it formerly did.
The slower indexing for inflation amounts to a $400 billion tax hike between 2028 and 2037 that would help finance the lower corporate rates, Lily Batchelder, a New York University law professor and former Obama White House adviser, observed on Twitter.
Congress could decide years from now to extend the lower tax rates. But doing so would increase the deficit far more than the $1.5 trillion now being estimated by Congress’ Joint Committee on Taxation.
Homeowners in high-tax states who skip the standard deduction could be hit with higher rates immediately.
The bill imposes a $10,000 cap on people who deduct their state, local and property taxes. Currently, there is no limit on how much in state and local taxes you can deduct.
Some Republican lawmakers in such high-tax states such as California and New York voted against the bill because their constituents’ taxes could increase as a result of the provision. Their opposition, though, didn’t block the bill’s passage.
City dwellers in those states may also being asked to pay more to commute to work.
It may get more expensive to ride the subway or park your car near your place of employment as a result of the tax legislation. Employers would no longer be able to deduct from their taxes the cost of providing parking or transit passes worth up to $255 a month to workers. Bicycle commuters would also lose their benefit from companies.
Technically, companies could still offer this benefit. But under the tax bill, they will lose the financial incentive to do so. Such a change could have the effect of reducing ridership on public transit and possibly increase costs for riders on rail and bus systems.
Some of the biggest winners are wealthy Americans like the president and his family and friends who will get a rate cut for themselves and the businesses
The tax bill intends to put more money back in peoples’ pockets by removing a penalty that was charged to people without health insurance as required by Obama’s 2010 health law as a way to hold costs down for everyone.
By eliminating this mandate, though, the tax bill will likely deprive 13 million people of insurance, according to estimates by the Congressional Budget Office.
The repeal of the health insurance mandate will help preserve revenue to pay for the tax cuts.
The government would no longer have to subsidize as many low-income people receiving insurance. This change would generate $314.1 billion over 10 years, according to the Joint Committee on Taxation.
Some of the biggest winners are wealthy Americans like the president and his family and friends who will get a rate cut for themselves and the businesses.
Oil drillers would assuredly benefit, too. So would multimillionaire and billionaire owners of sports teams.
Companies would also enjoy a bounty from permanently lower tax rates. Lawyers and accountants will profit from the advice suddenly needed to guide clients through the tax plan.
The White House said Tuesday that Trump could personally get hit with higher taxes as a result of the GOP legislation. The change is a likely a windfall for Trump’s real estate empire, the Trump Organization, however.
At least temporarily, companies with profits that double as the owner’s personal income would enjoy a substantial tax break. The Trump Organization consists of about 500 such ‘pass-through’ entities, according to the president’s lawyers.
Rather than pay the top rate of nearly 40 percent, Trump and other business owners like him would likely be taxed on these profits at closer to 30 percent.
The final bill also appears to specifically benefit the real estate sector, the bedrock of the Trump family’s wealth, with benefits for depreciating the value of property held by pass-through companies.
The president’s family didn’t receive every possible benefit, though.
The estate tax on inheritances, for example, will stay in place, though it will apply only to the portion of a family’s estate that exceeds $11 million – twice the previous level – at least through 2025.
And the alternative minimum tax, which is intended to prevent the wealthy from exploiting loopholes to avoid taxes, would stay in place as well, though its higher thresholds would also be temporary.