Posted on 12/02/2017 2:44:33 PM PST by Jim Robinson
Edited on 12/02/2017 2:54:27 PM PST by Jim Robinson. [history]
Updated.
I calculated federal income taxes for two hypothetical working class couples filing jointly under the new senate proposal compared to current law, taking the standard deduction in each case (see the pdf at source).
The first working class family has a combined income of $100,000 and if my calculations are NOW correct would owe $10,948 in federal income taxes under current law with an effective tax rate of 10.9%.
Under the senate proposal, this family's federal income tax would be cut to $8,739 with an effective tax rate of 8.7%. This is a substantial tax cut.
The second working class family has a combined income of $60,000 and would owe $4,948 in federal income taxes under current law with an effective tax rate of 8.2%.
Under the senate proposal, this family's federal income tax would be cut to $3,939 with an effective tax rate of 6.6%. This is a very substantial tax cut.
The tax cuts are even more dramatic if these families have children and can take the $1650 tax credit per child (compared to the $1000 per under current law).
If each of these working class families above have two children they get a tax credit of $1650 X 2
So the family earning $100,000 gets $3300 credit leaving a tax bill of $5,439 or 5.54% eff rate.
The family earning $60,000 gets $3300 credit leaving a tax bill of $639 or 1.4% eff rate.
Very substantial cuts!
Working class families with two children, earning $55,000 or less owe no federal income tax at all.
This will allow the vast majority of "working class" families to receive a substantial tax cut by simply taking the standard deductions.
Proposed “working class” tax cuts ping.
Where do these hypothetical famines live? If they live in high tax California, they’re not able to deduct the oppressive taxes they pay to the state. So, a tax increase on their federal returns, right?
Where do you guys find the calc to run these numbers? Id like to do my own, since we’re in one of the “SALT” states...
Bumped to the top!
Fixed it.
Not necessarily.
The brackets are wider and rates are lower.
That’s some nice savings.
If CA/NY/NJ/etc residents don’t like their tax rates they can vote out all their state lawmakers.
Good evening Jim, evening in Maine, afternoon in California.
Jim do you have a link for the tax calculator?
Thanks JIM,
Bob
I’m going to be smiling real bi,g at tax time!! Ret. Sr. Citizens in Southeast Arizona!!!
At these income levels, the increased standard deduction covers it. I live in California, am working class and can attest.
spread sheet
It depends entirely on your situation. For example, I am a single retiree with an AGI of $65K. My federal tax will probably double or triple.
I’m in one of the Salt states and my taxes will be lower because I won’t have to hire someone to do my taxes
Thanks for doing the calculations, Jim.
Democrats and some on our side won’t agree, but that’s normal.
At these income levels, the increased standard deduction covers it. I live in California, am working class and can attest.
Point taken. But aren’t you admitting that at higher double-income income levels, working couples will indeed pay higher federal taxes, if they live in California or other high tax states? Say, a cop and a nurse who together make $150,000 or more? That’s middle class - and they’ll be hit with higher federal taxes because they can’t deduct their oprressive California state taxes, right?
Click on the link at the top! It’s a PDF - you’ll be able to figure it out.
It’s just a simple spread sheet calculation using the proposed rates and standard deductions vs current law.
Here’s the chart I used for current and proposed brackets: http://static5.businessinsider.com/image/5a1ed8233dbef4cc1d8b8b4e-1200/married-filers-senate-tax-plan-brackets.png
According to the news about the bill that passed the Senate, the deduction for local property taxes would still be there for up to $10,000, and the mortgage interest deduction, to $1 million.
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