TCJA benefits significant for many
The benefits of the Tax Cut and Jobs Act (TCJA) passed at the end of 2017 will positively impact the take home pay of many Americans as soon as this month.
Unfortunately, to listen to many media reports and some politicians, it amounts to “crumbs” and favors the “rich.”
This is pure demagoguery which is exposed by a reading of the bill’s provisions.
First, marginal income tax brackets are reduced across the board. The 15 percent bracket drops to 12 percent, the 25 percent bracket to 22 percent, the 28 percent bracket to 24 percent and the 33 percent bracket to 32 percent or 24 percent.
These brackets cover all taxpayers with Adjusted Gross Income up to $400,000 and include almost 99 percent of all individual income tax returns filed in 2015.
For example, a couple with taxable income of $75,000 will see their bracket drop three percentage points. That is worth up to $2,250 to them ($75,000 x .03).
Reader can do their own math, based on their income and how much their bracket drops.
Second, the Standard Deduction doubles. For example, a couple filing jointly will see their standard deduction increase from $12,000 to $24,000. Not only will less income be taxed, but many taxpayers will not have to bother itemizing deductions on their income tax returns. State and Local Taxes and Mortgage Interest will still be deductible as an Itemized Deduction (up to certain limits) if that benefits the taxpayer.
On average, most readers of this column will benefit from the increased Standard Deduction.
Third, the personal and dependent exemptions are eliminated, which offsets some of the above, but it is replaced by a much larger child care tax credit of $2,000.
A tax credit of $2,000 is worth much more than a personal exemption of $4,050 — which only reduces taxable income by that amount. The child care credit should especially help lower-income families as it is refundable (as an income tax refund) if the tax filer does not have sufficient tax liability to use it.
Many taxpayers will start to see these benefits as early as this month because the IRS’ new lower withholding tables become effective in 2018. These new tables will take into account the bracket reductions and higher Standard Deduction.
As a result, most wage earners will see the amount withheld for Federal Income Tax reduced immediately.
Congressman Bill Shuster estimated that TCJA will reduce the income tax liability of his constituents on average by more than $2,000. A tax cut of that magnitude strikes me as significant for many households.
What constitutes “crumbs,” I guess, is in the mind of the beholder. The other major section of the tax law benefits another overtaxed group — owners of large and small businesses.
Those are the folks who create jobs for our family members. I hope to discuss that topic in the future.
Christopher Gable is an occasional contributor to the Mirror’s Opinion page.