Here’s How Much Your Taxes Could Rise Under Trump’s New Tax Plan

People in the lowest tax bracket could pay more under the plan.

President Donald Trump has announced a new tax plan that he believes is a “once-in-a-generation opportunity.” During public remarks in Indianapolis on Sept. 27, 2017, Trump promised that his new proposal will “cut taxes for the middle class, make the tax code simpler and more fair for everyday Americans, [… and] bring back the jobs and wealth that have left our country.”

Specifically, the president’s tax plan aims to accomplish a number of tasks, such as:

  • Reducing the number of personal income tax brackets from seven down to three — just 12 percent, 25 percent and 35 percent
  • Doubling the standard deduction for married and single filers to $24,000 and $12,000, respectively
  • Increasing the child tax credit for children under 17 years old
  • Giving a $500 tax credit to those caring for the elderly and other adult dependents
  • Cutting the corporate tax rate to 20 percent and cutting small business tax to 25 percent
  • Eliminating the estate tax and offering write-offs for companies that move their manufacturing plants to the U.S.

Take a look at the impact this tax plan could have on businesses, the national deficit, and arguably most importantly, your wallet.

How the New Trump Tax Plan Stacks Up to Trump’s Original Tax Plan

In April 2017, Trump announced his original tax reform plan, and while many of the tenets of his original proposal have remained the same, there have been some changes. Under the new plan, the lowest tax bracket would contribute 12 percent in personal income tax — a small jump up from the previous contribution of 10 percent.

The proposal for the standard deduction for married couple remains the same, but the standard tax deduction for single filers has increased. In addition, Trump has raised his proposed corporation tax rates from 15 percent to 20 percent.

Then (April 2017)Now (September 2017)
Effect on the Average Taxpayer
  • Consolidate the seven personal income tax brackets into three: 10 percent, 25 percent and 35 percent
  • Change standard deduction for married couples from $12,700 to $24,000
  • Change standard deduction for singles filers from $6,300 to $12,600
  • Consolidate the seven personal income tax brackets into three: 12 percent, 25 percent and 35 percent
  • Change standard deduction for married couples from $12,700 to $24,000
  • Change standard deduction from single filers from $6,300 to $12,000

Effect on Business Owners

  • Cut the top corporate tax rate from 35 percent to 15 percent
  • Cap corporate tax rate at 20 percent
  • Cap small business tax rate at 25 percent

Effect on Budget Deficit

  • Not addressed in plan; analysts believe it could add billions to deficit
  • Not addressed in plan; the Committee for a Responsible Federal Budget policy group estimated that the plan contains about $5.8 trillion over a decade of total tax cuts and would have a net cost of $2.2 trillion through 2027

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What the Tax Bracket Restructuring Means for You

Right now, personal income taxes are broken up into seven tax brackets, but Trump has proposed consolidating the income tax brackets into only three — though his plan allows for the congressional committee to add a fourth bracket for higher incomes. Currently, the top earners pay 39.5 percent in taxes — Trump’s proposal would give high-income earners a tax cut, slashing their contribution to 35 percent.

Here’s the current breakdown of federal tax brackets:

2016 Tax Brackets for Income Taxes Filed by April 18, 2017
Tax BracketSingleMarried Filing Jointly or Qualifying Widow(er)Married Filing SeparatelyHead of Household
10%$0 to $9,275$0 to $18,550$0 to $9,275$0 to $13,250
15%$9,276 to $37,650$18,551 to $75,300$9,276 to $37,650$13,251 to $50,400
25%$37,651 to $91,150$75,301 to $151,900$37,651 to $75,950$50,401 to $130,150
28%$91,151 to $190,150$151,901 to $231,450$75,951 to $115,725$130,151 to $210,800
33%$190,151 to $413,350$231,451 to $413,350$115,726 to $206,675$210,801 to $413,350
35%$413,351 to $415,050$413,351 to $466,950$206,676 to $233,475$413,351 to $441,000
39.6%$415,051 or more$466,951 or more$233,476 or more$441,001 or more

And here are the Trump proposed tax brackets:

Trump’s Tax Plan Proposal on Sept. 27, 2017
Tax BracketSingleMarried Filing Jointly or Qualifying Widow(er)Married Filing SeparatelyHead of Household
12%Income range unspecifiedIncome range unspecifiedIncome range unspecifiedIncome range unspecified
25%Income range unspecifiedIncome range unspecifiedIncome range unspecifiedIncome range unspecified
35%Income range unspecifiedIncome range unspecifiedIncome range unspecifiedIncome range unspecified

 

Although income ranges have not yet been specified under Trump’s new plan, the three different income brackets will pay 12, 25 or 35 percent in taxes. This new distribution raises the tax contributions for the lowest income earners and lowers contributions for those in the highest tax bracket.

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