The awaited Tax reform would be revealed by the House GOP leaders on Thursday, namely “Tax Cuts and Jobs Act,” which is said to be pushed into being finalized before Christmas.
Trump’s tax plan proposes four federal income tax brackets where it could be simplified from the current seven. These are 12%, 25 %, 35%, and 39%.
To better understand what kind of taxes will be reduced, eliminated, or increased, here are some of the proposed plans along with the beneficiaries and payers of the tax reform:
Households: Lower rates
The current marginal income tax brackets which stands at seven will be reduced by the bill to four, and lower taxes by widening the income ranges affected by each rate.
The individual Alternative Minimum tax, which primarily involves and affects households with incomes that ranges from $200,000 to $1 million, would be repealed by the bill and would maintain preferential rate for investment income. This will also repeal the estate tax after six years in the process.
Child Tax Credit and Standard Deduction: Increased rates
The tax reform would nearly double the amount in comparison to the standard deduction and cut personal exemption, a prediction based on the taxpayer population and the dependents claimed on a return.
The recent single deduction would be on the higher side for many filers, except those with multiple children. This entails that a child tax credit increase to $1,600 from $1,000 and a new $300 credit for each individual parent and non-child dependent will possibly make up the difference.
State and Local Tax Deduction: Eliminate
The tax for state and local would be the biggest deduction that would be eliminated, where it primarily helps people in blue states that enforce higher taxes.
An analysis found that of the 20 congressional districts which shows the highest percentage of returns claiming the deduction in 2014, proved that political divide is not so straight-forward.
The Beneficiaries and Losing end of the Tax Plan
Although the tax plan states its advantages and disadvantages, this still apply depending to the receiving end of the increases, cutting, and elimination of rates.
Big corporations are first in line that would benefit from the substantial tax deduction that they would receive. The bill cuts the top rate from 35 percent to 20 percent that large corporations usually pay.
The rich and elite. The “death tax” as it is famously called by critics would be eliminated by 2024, meaning wealthy families would be able to handle the passing of estates and trust funds to their heirs tax-free.
Another beneficiary would be “pass through” companies, where in a number of wealthy Americans who operate their businesses built as sole proprietorships or LLC would receive a sizable discount on their taxes.
Under the GOP plan, People in high-tax blue states would still have the ability to deduct $10,000 regarding the property taxes they locally pay, but would not be able to deduct the other taxes from their federal tax payments that they give to the state or local governments anymore.
While the bill provides tax breaks for big corporations, the working poor who consists the bottom 35 percent of Americans, do not gain extra benefits.
Charities will also possibly be affected, the National Council of Non Profits warns as charitable deductions are likely to suffer under this bill. Since the GOP enables the rich population to continue their charitable giving and upper-middle-class families would not receive that tax break.
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