The Pardu

The Pardu
Watchful eyes and ears feed the brain, thus nourishing the brain cells.

Thursday, November 2, 2017

The Trump Tax Plan


Image result for tax plan

As we await the release of the Trump Tax Plan, take a look and read of a perspective from a source which always hits the nail on the head (See Connect The Dots USA below).

The Republicans are feeding you (and us) a pure bucket of malarkey with terms like jobs, worlds highest tax rates, and other related lies.  The plan is no way a major savior of the US Middle class.  Paul Ryan is talking about living a paycheck away from disaster. Well, saving Ryan's $1182 per year will not stop anyone family in the middle class for financial disaster.  You and the average family will receive $1182 USD will not use that savings to offset kids tuition, nor will it adequately equate to constant cost and prices increase at the grocery store. 

MSNBC's Hallie Jackson and KC Hunt detailed the tax plan shortly after Ryan and his associate wealthy American facilitators released the wealthy tax cut.

No automatic alt text available.
Trump and the GOP are frantically trying to pass their giant, budget-busting, deficit-fueling, $5.8 Trillion, “Cut, Cut, Cut” tax heist. 80% of the benefit will redound to the Top 1%, with the rest of us paying for it in the form of higher taxes and draconian cuts to programs we like and need including Medicare, Medicaid and Pell grants. Even with those cruel spending cuts, the GOP plan is still projected to add $1.5 Trillion to the debt over the next decade. Fiscal conservatives? Ha!
When evaluating whether a particular tax proposal would benefit you, watch out for three types of moving parts:
1) The rates
2) The income brackets that apply to each rate
3) The deductions, exclusions, preferential rates and tax credits that reduce what counts as taxable income or otherwise lower total tax amount.
This chart addresses #1 and #2. The yellow section shows the current income tax brackets that began under Obama in 2013. The bracket dollar amounts are adjusted for inflation each year (2017 dollars shown here). The important thing to remember is that no matter how much total income a household has, the TAXABLE income that falls in each bracket is taxed at the same rate for everyone in that household type. So even Oprah pays only 10% on her first $9,325 of taxable income.
Let’s do an example: 
Take a married couple with two children and total income of $100,000. They put $10,000 in their 401k and take the standard deduction ($6,350 x 2 = $12,700) and four personal exemptions ($4,050 x 4 = $16,200). 
That leaves $61,100 in TAXABLE income ( = $100,000 minus $38,900). Using the chart, they pay:10% tax on the first $18,650 = $1,865 plus15% on the next $42,450 = $6,368TOTAL TAX = $8,233
Even though this family has some income taxed at the 15% rate, their EFFECTIVE tax rate is just 8.2%. And that doesn’t even include the family’s employer-subsidized healthcare benefit of $13,000, which is excluded from taxable income. Americans mistakenly believe their tax rate is way higher than it actually is. Imagine if they had to pay a “flat tax” of 15% on all their income, with no deductions/exclusions.
For some historical context, you can see the Clinton and Bush rates in the columns on the left. Notice how Bush slashed almost every bracket by 3 to 5 percentage points, which led to lost tax revenue of $2.5 Trillion dollars over the first 10 years. No wonder the debt and deficit ballooned! Trump and the Republicans are now concocting a similar heist on steroids.
Trump’s proposal condensed the rates to just three: 12%, 25% and 35%. Because he provided no brackets, all we can know is the bottom rate goes up and the top rate goes down. The plan also nearly doubles the standard deduction, but it eliminates the personal exemptions. So our family of four would lose out. Instead of $28,900 in deductions/exemptions, they would get only a $24,000 deduction. And $4,900 more of their income would get taxed. The GOP also recently suggested limiting the 401k contribution exclusion. Our hypothetical family could end up paying a lot more in taxes.
One thing is certain: The Top 1% will get a giant windfall with lowering the top rate to 35%, capping pass-through business income at the 25% rate, eliminating the estate tax and alternative minimum tax, and lowering the capital gains rate.
The Lesson: Keep your eyes on all the moving parts.


NPR published a great piece about how the plan will affect taxpayers.
Here is an excerpt from the NPR piece.

             SINGLE                              MARRIED

chart showing different tax brackets for singles   chart showing different tax brackets for married filing jointly


No comments :

Post a Comment