The Senate is entering the final stretch of a massive tax overhaul push that will impact millions of Americans in different ways.
By-and-large, the most costly provision continues to be reducing the corporate tax rate to 20 percent. The Joint Committee on Taxation (JCT) gives that a $1.4 trillion price tag. Republican claims the measure would pay for itself were also debunked this week by the JCT. Their analysis estimated the bill would grow the economy by .8 percent over a decade, still adding $1 trillion to the deficit.
When it comes to individual income taxes, the Senate measure also makes broad cuts across income levels. However, most of the individual income tax provisions will sunset after 2025 unless Congress acts. The bill also includes a change to inflation adjustments that would raise taxes slightly compared to what they would have been under current law.
By 2027, every income group under $75,0000 is expected to see tax increases according to the Joint Committee on Taxation.
The corporate rate cut, from 35 percent to 20 percent, will be permanent.
The Senate bill is not the final word.
The Senate and House versions of tax reform have big differences including the treatment of the health insurance mandate penalties, as well as the number of tax brackets. The two will need to be reconciled before they get to President Trump’s desk.
Here’s how the Senate plan could affect you:
2017 rates versus your rate under the Senate bill
The Senate bill maintains seven brackets, the same number as exist under current law, but it also lowers most of the rates and raises many of the income thresholds. For example, a married couple making $200,000 in 2017 would have paid $42,884.50 in taxes. Under the Senate bill, they would move from the 28 percent to the 24 percent tax bracket, and their tax bill would drop to $37,079 — before deductions are considered.
Standard deduction goes up, other deductions out
The Senate bill would nearly double the standard deduction.
For individuals, it would go from $6,350 to $12,000. For married joint filers, it raises that deduction from $12,700 to $24,000. This may result in fewer taxpayers itemizing their deductions, and the bill’s supporters hope that standard deduction increase will help offset the elimination of other deductions.
“Generally speaking, if you are a taxpayer that takes the standard deduction currently … good chances are you get a tax cut,” said Scott Greenberg, a senior analyst at the…