On Wednesday, President Trump is set to propose a tax plan that would include “maybe the biggest tax cut we’ve ever had.” Here’s what he wants to do and what it means for you.
The “Massive” Tax Cuts Trump Has Proposed
First, he’ll probably unveil his corporate tax rate cut, which he has proposed to slash from 35 to 15-20 percent. But he’s also pledged to reduce individual taxes, too. He wants to reduce the number of tax brackets and simplify the system, including deductions and loopholes, and reduce the top tax bracket from 39.6 percent to 33 percent.
Right now, our tax system includes seven brackets, and Trump’s tax plan would pare it down to just three: 12 percent 25 percent, and 33 percent. He’s also proposed to increase the standard deduction from $6,300 to $15,000 for single taxpayers and from $12,600 to $30,000 for married couples filing jointly. To offset the cost of that, he’s proposed to eliminate personal exemptions, including exemptions for dependents, and the head-of-household deduction. During the campaign, he did propose a plan for deducting childcare expenses (the Center for American Progress estimated it would save middle-class families an average of $5.55 a year).
How Much You’ll Save
The Tax Policy Center crunched the numbers to see how much taxpayers would save with the changes. Unsurprisingly, the cuts benefit the wealthiest taxpayers most. Middle-income households would receive an average tax cut of about $1,010 (1.8% of after-tax income) while the top 1% of earners would get $214,690 (13.5% of after-tax income).
With the exemptions eliminated, some taxpayers would actually pay more under the new plan, namely those who earn between $20,000 and $50,000 a year and have children. You can use this calculator to see how your own taxes would change under Trump’s proposed plan.
Trump has also proposed to end the Alternative Minimum Tax, a tax designed to offset the cost of loopholes that allow the super wealthy to shelter a large percentage of their earnings (Although the AMT has complicated taxes for a lot of middle-income taxpayers, too).
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