SMITH BRAIN TRUST – President Donald Trump’s tax reform proposal, as unveiled last week, would reduce income taxes for many Americans, says William Longbrake, an executive in residence at the Center for Financial Policy at the University of Maryland’s Robert H. Smith School of Business.
Middle and lower income households would benefit in three ways, but to varying degrees, he says.
1. Reduced tax rates. Individuals earning up to $25,000 annually and married persons filing jointly and earning up to $50,000 annually would pay no tax. The White House estimates that this change would eliminate 75 million households from paying any federal income tax.
2. Standard deduction doubled. This deduction would become $12,000 for an individual and $24,000 for married persons filing jointly, he says. Furthermore, with the exception of the mortgage interest and charitable contributions deductions, all other deductions would be eliminated, which would greatly simplify filing requirements for those in the 10 percent, 25 percent and 35 percent tax brackets.
3. Child and dependent care relief. Trump’s tax principles, while lacking any specifics, state that tax relief will be provided to help low-income families with child and dependent care expenses, Longbrake says. A study by the Tax Policy Center based upon Trump’s campaign tax reform proposal concluded that fewer than 10 percent of low-income households with children would receive any benefits. The study also found that families earning between $10,000 and $30,000 a year would receive an average childcare benefit of just $10.
Overall, Trump’s tax proposals would simplify filing requirements for many Americans, Longbrake says. But “a negligible amount of the estimated $3 trillion to $7 trillion in reduced taxes over the next 10 years would benefit low-income families.”
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