What the Senate tax plan would mean to you - Part 1 - individual taxes:

What the Senate tax plan would mean to you - Part 1 - individual taxes:  

Bottom Line: Last Tuesday I completed a two-parter on what the GOP House tax cut plan would mean to you. If you missed it, it's worth your while to pull it up on the website but here were a few of the highlights on the personal side... 

  • Everyone who currently pays federal income tax would benefit 

  • Applying standard deductions to today's code compared to the proposed code the average person who earning $25,000 would benefit by $795 next year if it were to pass and the savings would accumulate until reaching the top tax rate of 39.6% - the max savings achieved before reaching the top tax rate would be $23,538 (for a married couple filing joint returns) 

So, what does the Senate plan do? It's far more similar to the current code but there's real benefit upon review. Here's a side-by-side comparison: 

Current rates: 10%, 15%, 25%, 28%, 33%, 35%, 39.6%  

Standard deduction: $6,350   

Proposed: 10%,12%, 22.5%, 25%, 32.5%, 35%, 38.5%  

Standard deduction: $12,000  

For the ease of conversation, I'm going to compare individual income with the standard deductions to provide you with how this would work currently and going forward. If you earn:   

$25,000  

Current code: $2,331  

Proposed code: $1,370  

Savings: $961 ($795 house plan) 

$50,000  

Current code: $6,651  

Proposed code: $4,370  

Savings: $2,281 ($2115 House plan) 

$75,000  

Current code: $12,901  

Proposed code: $9,997  

Savings: $2904 ($3051 House plan) 

Despite being more complicated with more brackets and deductions - the Senate plan actually benefits the individual earning $50,000 or less far more than the House version. The plan lessons the burden for individuals compared to our current code but the House plan is more favorable for those earning over $50k. The info above gives you and ideas as to how and with the tax rate being reduced from 39.6% to 38.5% under the Senate plan, everyone would benefit and continue to do so even at the top bracket. So demonstrably both GOP proposed tax plans provide meaningful tax relief for the "middle-class" by any definition. Any argument to the contrary is incorrect and a demonstrable lie.   

One more non-middle class related example. Currently the top tax rate of 39.6% kicks in for married couples filing jointly at $470,700. So, what would that couple pay today vs the new proposed code?  

Current code: $127,183  

Proposed code: $117,537  

Savings: $9,646 ($23,538 House plan) 

In other words, everyone benefits meaningfully prior to arriving at the top tax code of 39.6%. This in turn shifts the burden further towards upper income earners.   

 

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