The Republican Tax Reform bill is making progress to pass by the end of 2017. From its initial House version that was released to the public on November 2nd, multiple changes have been made in order to subside criticism regarding tax breaks for the wealthy and burdens on the middle class. Below are the most current basics on the reform that you need to know with some help of charts made by The New York Times 6 Chart Explanation.
Reductions of Tax Income Brackets
Currently the United States has 7 Tax Income Brackets, the highest bracket being taxed 39.6% while the lowest being 10%. The current proposal would simplify the brackets down to 4 different categories, the highest remaining 39.6% with the lowest changing to 12%.
The purpose of the reduction on brackets is to simplify the way we do taxes now. Donald Trump has stated that the Republican bill would make it so easy that Americans would be able to do their taxes on a postcard. Although the postcard version of taxes is not likely to occur, keeping taxes to 1 page could be achievable.
Eliminating Obamacare Individual Insurance Mandate
The republican effort to repeal Obamacare has in the first year of President Trumps Administration had failed after numerous attempts. The tax bill on Tuesday was revised including a change to remove the individual mandate to have insurance in order to void paying a penalty. Critics of the repeal in the tax bill argue that removing the current mandate will increase premiums which will result in more Americans not being able to afford healthcare.
Eliminating State and Local Tax Deductions
The tax bill would eliminate the State and Local Tax (SALT) deductions. The SALT deductions allow tax filers to deduct those taxes off of their Federal taxes bill. This benefit helps citizens living in areas where taxes are higher at a local level.
Standard Deductions Increase, Child Tax Credit, and Elimination of Personal Deductions
The Standard Deduction is the standard amount that you deduct from your income before it’s taxed at the federal level. The amount deducted changes depending on the marital status of the filer. The new tax plan will nearly double in size which is intended to allow lower income earners to keep more of their money. The change is most significant to the 10% bracket that will now change to 12%. With the Standard Deductions being higher, the proposal will eliminate Itemized Deductions which calculate the deduction based on numerous factors. Two deductions being preserved however are the Mortgage Interest and Charitable Donations.
The Child Deduction Tax is also changing. The House initially proposed to increase the deduction from $1,000 to $1,650. On Tuesday, a revised version was proposed allocating a $2,000 deduction which is $450 higher than originally proposed.
Corporate Tax Cut
The newly proposed bill would cut the Corporate tax rate from 35% to 20%. While the individual tax breaks would expire at the end of 2025, the Corporate cuts would remain permanent.
Check out a few more great articles where TGA Report sourced their information
New York Times: Revised Tax Proposal
Wall Street Journal: Live Tax Bill Coverage
Business Insider: GOP Tax Reform
Los Angeles Times: Changes to Individual and Corporate Tax