October 12, 2017 under Policy, Advocacy & Research
If you’ve been walking around feeling untouched and unscathed by the actions and inactions of President Trump to date, here’s one of his proposals you may want to pay attention to if you and those you love aren’t all making$400,000 or more annually:
The President’s Tax Reform Proposal, which he affectionately calls a “Middle Class Miracle”, is looking more like a Middle Class Take Down! And with the House passing the budget resolution last week, the likelihood of his tax form being passed has just become greater.
Most of the details have not yet been released, but there’s enough that’s been made public to reasonably and summarily conclude that the only people who are going to see their economic opportunities meaningfully extended with this proposal are the rich!
Currently there are seven federal income tax brackets with the lowest income earners paying 10% of their income in taxes, and the highest income earners paying nearly 40%, unless they take advantage of tax benefits for which they’re eligible.
Under the proposed tax reform, there would be just three federal income tax brackets. People with the lowest income would fall into a higher federal tax bracket of 12%.
There would be a middle tax bracket of 25%. The annual incomes in this bracket have not yet been specified. Some would stand to gain and others lose. If you’ve been taxed at 20%, your federal tax rate could go up and there’s a good likelihood you would have less take home income after taxes are deducted and paid. If you’ve been taxed at 28% or 33% under the existing structure, you may see slightly more in your paycheck after taxes under this proposal. However, a lot of this hinges on how you fare if proposed changes to itemized deductions and state and local tax deductions go through too.
And, that annoying Alternative Minimum Tax that was put in place to make sure that higher income people like the President, who take advantage of so many tax benefits and itemized deductions that they wind up having to pay virtually nothing compared to what they earned — under this proposal it’s GONE!
And, that other pesky tax — the estate tax which is a tax on inherited assets of $5.5 million or more — GONE TOO!
The short of it: If you make a lot, you and yours get to keep much more of it!
So, what’s the potential impact?
And where are they going to find the spending cuts to offset the lost tax revenues–from those federal programs that are intended to meet all of our needs — education, environment, healthcare, law enforcement, and of course, those federal programs and allocations intended to help meet the needs of our lowest income neighbors, sisters, brothers and friends — food support, child care block grants, housing assistance, and on and on and on.
And on an individual basis, especially for low and lower middle-income earners, a loss of key deductions could easily mean the difference between getting by and getting ahead, and achieving the American dream. Less deductions could mean less disposable/discretionary income, thereby decreasing your ability to plan and save for your and your family’s future — for home ownership, college, grad school, and more.
Are you feeling the heat yet? Inhaling the smoke? Has the fire reached your door or that of a loved one? Are you ready to engage or very possibly get played? If you haven’t felt the need to resist yet, maybe this will move you to act. The current implications of this tax plan should be a motivation for us all.
Jennifer Jones Austin is the CEO and Executive Director at FPWA and co-hosts a segment about poverty and national policy for the nationally syndicated radio show, Keepin’ It Real with Rev. Al Sharpton, which airs Thursdays at 2:00 pm ET.