Posted by: maboulette | May 13, 2018

What GOP Says: You’ll Get A Tax Cut


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Putting aside President Trump’s penchant for exaggeration, independent analysts agree the Republican bill would deliver a tax cut for the majority of Americans. In 2018, middle-income households — those earning $49,000 to $86,000 — will see an average tax cut of $930 on average, according to the nonpartisan Tax Policy Center. Those who make a bit more but might still plausibly be called middle class — families earning $86,000 to $149,000 — will get back even more, with an average tax cut of just over $1,800.

WHAT YOU SHOULD KNOW: IT’S ONLY TEMPORARY.

No one in the middle class is going to turn up their nose at an extra thousand bucks. But critics have been pointing out that the tax bill could have done much more for middle earners. That $900 pales in comparison to the average $51,000 tax cut that Americans in the top 1% of earners — those taking home $733,000 and up — will reap. Overall, the 1% will reap more than 20% of the total value of the tax cut, roughly the same amount as Americans in the bottom 60% of the income distribution, the Tax Policy Center found.

BIGGER PROBLEM FOR THE MIDDLE CLASS

There may be an even bigger problem for the middle class, however. Budget rules tied Republicans’ hands, limiting their ability to make changes that extend more than 10 years in the future. As a result, most personal tax provisions in the bill expire by 2026. Meanwhile, other tweaks — like a new, less generous way of accounting for inflation — will work against middle-class taxpayers over time. As a result, a decade from now, about two thirds of middle-class taxpayers will see a tax hike, albeit a relatively small one of about $150, according to the Tax Policy Center.

WHAT THE GOP SAYS: TAXES ARE GETTING SIMPLER.

Another big Republican promise. Taxes so simple you could file them on a postcard. Trump even went so far as to hold up a card and kiss it. Again, this has proved an exaggeration. But the tax bill should make filing simpler for millions.

That’s because the bill doubles the standard deduction to $12,000 from $6,500 (and to $24,000 from $13,000 for couples). The standard deduction is the amount all taxpayers can lop off their income before applying tax rates. Taxpayers whose individual deductions — for items like a work cell phone or a home mortgage — exceed the standard deduction can claim those instead, but must detail, or itemize, each specific expense to the IRS. While more than 46 million tax filers would be expected to itemize next year under current tax law, that number would drop to less than 20 million under the Republican tax plan.

WHAT YOU SHOULD KNOW: SIMPLE ISN’T EVERYTHING.

No one likes doing their taxes. So, this seems at first glance like another clear win for the GOP. But it’s a bit more complicated.

Allowing all taxpayers to deduct another $6,000 or more from their tax bills could prove very costly to the government’s budget. To offset the lost revenue the bill makes a series of other changes to the code. It eliminates another perk known as the “personal exemption,” which allows taxpayers to deduct $4,150 for themselves and each qualifying child. Then because eliminating the personal exemption could hurt families, the bill also refines another facet of the code, doubling the child tax

 

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