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Trump’s New Tax Plan & Your Wallet
Trump’s Tax Plan and Your Wallet: What You Need to Know
Approximately 20% of Americans will face a tax increase
Trump. Taxes. Two words that have been intertwined in the months leading up to the Presidential election. Now that Election Day has passed, many Americans are wondering what, exactly, his new tax plan means for them personally. Most analyses of his proposal have centered upon one theme: the rich pay less in taxes under Trump’s plan. Do all the rich stand to benefit? And what about everyone else?
Reduced tax brackets
At the heart of Trump’s tax plan is reducing the number of tax brackets from seven to three: 12%, 25%, and 33%. This forces some taxpayers into a lower bracket than their existing one, while moving other Americans into a higher marginal tax bracket. In considering these tax groups, it is worth noting that the median household income in the United States is $55,775.
Analysis shows that this proposed tax bracket change results in the richest taxpayers seeing the largest tax reduction and the poorest taxpayers seeing the greatest increase in taxes. That is hardly new information. However, in addition, there is a group of taxpayers within the wealthy group that may get hurt or see very little benefit from these proposed changes.
Taxpayers with taxable income in the following ranges will have an increase in marginal tax rate – from 28% under current policy to 33% under Trump’s proposed plan.
- Individual tax filer: Between $112,500 and $190,150
- Married or joint filers: Between $225,000 and $231,450
What does that mean for your wallet? A single filer earning $190,150 who takes the standard deduction could owe $3,000 more in taxes under Trump’s proposed plan. A single filer earning $130,000 would pay $875 more in taxes, and joint filers reporting a gross income of $231,450 would see their taxes increase by about $320.
The richest group gets richer
Estimates indicate the Trump tax plan will reduce federal tax revenue by an estimated $6.2 trillion over the next ten years. Of the proposed tax cuts, almost 47% will go to the wealthiest 1%. What does that mean exactly? Those Americans earning less than $48,400 will have an annual tax cut of less than $400. Americans earning in excess of $700,000 will receive an average of $215,000 more each year.
Trump’s plan to reduce the top tax rate from 39.6% to 33%, combined with his plan to cut business tax rates from 39.6% to 15%, results in a huge financial benefit to those individuals at the higher end of the income scale. According to the Tax Policy Center, approximately 20% of all American households will see an increase in taxes under Trump’s plan.
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