Economists say there’s little relationship between post-tax profit rates and business investment that boosts productivity, while productivity and wages have grown faster in periods of higher taxes, according to the left-leaning Economic Policy Institute.
How would the richest Americans fare under the bill? The GOP plan keeps the highest individual income tax bracket for the country’s top earners at 39.6 percent. But critics say the proposal still provides a windfall to rich families because it will double the limit on the estate tax to $10 million and then phase it out after six years.
The proposal also calls for a 25 percent rate for pass-through businesses, such as sole proprietorships and partnerships, rather than paying the individual tax rate. For the rich — who are more likely than the middle class to employ such tax structures, that could produce a sizable savings.
The proposal also does away with the alternative minimum tax, which will help reduce taxes on some higher-income taxpayers.
Would any deductions be eliminated? Yes and no. The plan proposes limits on two popular deductions, which may hurt Americans in highly taxed or expensive states such as New York and California. The two biggest impacts will be on the mortgage interest deduction and the deduction for state and local taxes. Here are some of the more notable changes:
- Homeowners will be capped at taking deductions on home mortgages greater than $500,000.
- Deductions for state and property taxes would be capped at $10,000.
- The medical expense deduction would be eliminated.
- Despite talk of capping the tax break for 401(k) plans, the proposal doesn’t include changes to the retirement plans.
How would my tax bracket change? The plan calls for reducing the number of tax brackets from seven currently to four: 12 percent, 25 percent, 35 percent and 39.6 percent (many poorer Americans would continue paying 0 percent). Under current tax law, single filers who make between $37,951 and $91,900 pay the 25 percent rate, but the plan would change the 25 percent tax bracket to cover single filers earning between $45,001 to $200,000, for example. Americans who currently make between $91,901 and $200,000 would be pushed into a lower tax bracket from their current 28 percent to 33 percent currently.
How would the tax plan help families? The standard deduction will increase to $12,000 for individuals and $24,000 for married couples, or almost double the current standard deductions. The proposal also increases the child tax credit to $1,600 from $1,000. It also provides a $300 credit for non-child dependents, such as spouses. Nevertheless, child welfare advocates say the measure doesn’t go far enough to help children, with Andy Stettner, a senior fellow at The Century Foundation calling the higher child tax credit “a half measure.”
http://www.mrmontano.com/wp-admin/post-new.php”The drop in federal revenues will jeopardize critical investments in education, healthcare, and social services for tens of millions who need them most,” Stettner said in a statement.