Tax deduction: reduction of an income that can be taxed and is commonly from a result from expenses.
Itemized deduction: tax deduction from a person's gross income that is made up from money spent on goods and services throughout the year
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Since its rearing on Thursday, November 16th, the new Tax Bill could spell out many benefits, and troubles, for American middle class families. The article includes an interactive chart, picture shown above, explaining the effects of the bill on middle class families. The vertical axis represent income, the horizontal axis conveys the size of the tax cut/increase. The right side represents tax cuts, the left is tax increase. The article does a better job of explaining the chart so check it out! (For you) Now before one dives in, let it be known that this bill, if it’s passed, will affect different types of families in completely different ways; its effect on everyone however is absolute. First off, mostly everyone who takes a standard deduction gets a tax cut; essentially this means that they’ll have to pay a lump sum of all their deductions wrapped into one. The bill would raise the amount, slightly more for a married couple, and most would not get a tax increase. Those who itemize their deductions, would pay more, a lot more. Secondly, families with children get a greater tax cut. The bill would double the child tax credit to $2000 dollars per child resulting in a tax cut for families that earn higher. Thirdly, those who pay great amounts of money towards state and local taxes could see a big tax increase. One of the bill’s major changes would be the elimination of deduction of state and local taxes. It would affect a majority of people living on the coast- New York, California, Connecticut- states that vote for democrats and have higher tax rates. Lastly, and unfortunately, the future might bring a tax increase for middle-class households; not only will individuals be taxed higher, but households too. All of those benifits- the cuts, child credit, etc.,- is set to expire in 2025. About ⅔ of middle class holder would get a tax increase and none would get a cut. The bill would also cut taxes on business, which would not expire. Congress tax analysts group, the Joint Committee on Taxation, claim that workers might get higher wages from thier less taxed employers, but many aren't agreeing with those odds.
Itemized deduction: tax deduction from a person's gross income that is made up from money spent on goods and services throughout the year
Article Link
Since its rearing on Thursday, November 16th, the new Tax Bill could spell out many benefits, and troubles, for American middle class families. The article includes an interactive chart, picture shown above, explaining the effects of the bill on middle class families. The vertical axis represent income, the horizontal axis conveys the size of the tax cut/increase. The right side represents tax cuts, the left is tax increase. The article does a better job of explaining the chart so check it out! (For you) Now before one dives in, let it be known that this bill, if it’s passed, will affect different types of families in completely different ways; its effect on everyone however is absolute. First off, mostly everyone who takes a standard deduction gets a tax cut; essentially this means that they’ll have to pay a lump sum of all their deductions wrapped into one. The bill would raise the amount, slightly more for a married couple, and most would not get a tax increase. Those who itemize their deductions, would pay more, a lot more. Secondly, families with children get a greater tax cut. The bill would double the child tax credit to $2000 dollars per child resulting in a tax cut for families that earn higher. Thirdly, those who pay great amounts of money towards state and local taxes could see a big tax increase. One of the bill’s major changes would be the elimination of deduction of state and local taxes. It would affect a majority of people living on the coast- New York, California, Connecticut- states that vote for democrats and have higher tax rates. Lastly, and unfortunately, the future might bring a tax increase for middle-class households; not only will individuals be taxed higher, but households too. All of those benifits- the cuts, child credit, etc.,- is set to expire in 2025. About ⅔ of middle class holder would get a tax increase and none would get a cut. The bill would also cut taxes on business, which would not expire. Congress tax analysts group, the Joint Committee on Taxation, claim that workers might get higher wages from thier less taxed employers, but many aren't agreeing with those odds.
(P.S: There's a pop-up block on the website, sorry!)
Questions:
- What are your thoughts on this bill, especially now that it has passed Senate budget committee?
- Are there any foreseeable problems or errors with this tax bill?
- How do you think it would affect you personally?
5 comments:
Would definitely look at the article, but the unremovable "Sign up for our newsletter!" pop-up makes it near impossible to read. Cmon, New York Times. Get your stuff together.
Sorry about that.
Looking at the graph, it seems like most of the tax cuts/increases are within plus/minus $2000, which is a considerable amount of the current tax. A majority of middle-class families are receiving a tax cut, but the bill definitely favors those who take the standard deduction versus itemizing, which could cause some backlash from the 25% who are receiving a tax increase instead. Also, the elimination of local/state tax deduction is a huge blow for us in California and other states with relatively high taxes.
I don't like the ideas behind this tax bill. My main concern is that the money for the tax cuts and increased credit is coming from nowhere, not to mention they are temporary. Of course some of the money from the tax increases and repeal of state/local tax deductibles (which also sucks) would go towards the aforementioned benefits, but it's still not enough to fill the void. The NYT article also speculates that this bill might force cuts in MediCare spending, which will REALLY suck. If this bill cuts taxes temporarily but costs everyone deductibles and quality of MediCare, I don't think that's close to worth it.
I do think the American middle class is different than the middle class here in the Bay Area. Households that only make even 80k a year probably have a hard time living here, and the median here is definitely much higher. I do see the problem with punishing those who live ins rates with already high state tax rates, but for most of us, this bill might still reduce overall tax and might be seen as good in that way.
The biggest issue I see with tax reform is the idea of conservation - if there is less money going into the government, the rest of the money doesn't appear out of nowhere, which means that the government will have to cut certain spending or dig further into its yearly deficit.
Personally, living in a family of four for the time being, I think the money saved from this tax cut could really benefit. And as I will be moving out and earning salary in the near future, I know that less taxes will be a relief (also taxation is theft).
As for the federal budget and the national debt, the tax cut can (theoretically) stimulate economic growth, which could cover the decrease in federal revenue. We'll have to see. Either way, I think that the government should be cutting back on spending anyways.
I agree with Michael on the fact the the median in the Bay Area is much higher and it is more expensive to live here than in other places in the U.S. And since we live in the Bay Area, I feel like this tax plan will be beneficial to us. The problems with this plan are for families or individuals who mark either below 30,000 USD or in a range where the tax is increased. Without Cali tax, families could save so much money. Since this is a tax cut, it will ultimately reduce government spending. This could be a good thing but it can also be a bad thing
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