[Updated 15:17 CDT]
Now that we have actual bill text, I have recalculated the impact of the Trump/Noem tax plan. Where the early Trump/Noem talking points suggested my family might save $50 to $100 in taxes, the revised bill before the House appears to lower my family’s 2017 tax bill by $326, a 3.7% decrease over what we would pay under the current tax structure. In 2023, Trump/Noem start taking that money back, hitting us with a 2.0% increase over current law. When our child leaves our tax return, we’ll pay 9% more in taxes each year than current law would impose.
To reach this conclusion, I have consulted these helpful NPR charts showing tax brackets, as well as explanations of the tax proposal from Politico, The Hill, the Washington Post, and the Bureau of Labor Statistics. I assume our income does not change from 2016 and round some figures here for a small measure of privacy.
Deductions: When we do our 2017 taxes, my wife and I will file jointly, as we have since 2002. Current law would entitle us to at least a $13,000 standard deduction. However, last year, we were able to itemize state and local taxes, mortgage interest, and charitable giving to knock $16,400 off of our taxable income.
The Trump/Noem plan increases our standard deduction to $24,000. It repeals the deduction for state and local sales tax, reducing our available itemizable deductions to $15,378. We thus would choose the standard deduction, thus excluding $7,600 more of our income from taxes than we could last year.
Exemptions: Current law allows us a $4,150 personal exemption for each family member. Three exemptions (wife, daughter, me) yield total personal exemptions of $12,450. The Trump/Noem plan gets rid of personal exemptions. That puts $12,450 of our income back on 1040 Line 43, the income on which we must pay tax.
Combine increased standard deduction and repealed personal exemptions, and my family pays tax on $4,800 more than we would under current policy.
Tax Rates: Our taxable income is below $18,650, which is the upper limit of the current lowest tax bracket. The current tax rate on that money is 10%. That translates to $1,480.
The Trump/Noem plan moves the cap for the lowest tax bracket up to $90,000 of taxable income. However, Trump/Noem increases the bottom rate to 12%. Combine our higher Trump/Noem taxable income with a higher 12% tax rate, and our calculated tax jumps to $2,350.
Child Tax Credit: Current law gives us a $1,000 child tax credit for successfully procreating. Because our Dear Leader has such a keen interest in promoting childbirth, the Trump/Noem plan increases the child tax credit to $1,600. Update 14:38: As pointed out by commenter Chris below, Section 1101.a.1.a.2 (pp. 67-68 in the amended form posted Friday) adds a new “Family Tax Credit,” which appears to give an additional $300 tax credit to each spouse. The new $1,600 Child Tax Credit and the $600 in Family Tax Credit that my wife and I can claim will knock $2,200 off our taxes due.
However, Republicans have scheduled the Family Tax Credit to go away in 2023 to keep the plan from violating budget caps.
Of course, whether Congress extends the FTC or not, we’ll lose it in 2024 when our child turns 18. Update 15:17: Once our daughter is out of our tax picture, we will pay 9.0% more in taxes than current policy would impose.
Self-Employment Tax: Due to my self-employment and my wife’s church employment, we incur another $8,300 in self-employment taxes. The Trump/Noem plan does not appear to make any changes in self-employment tax. The bulk of our tax bill thus remains the same. (As small recompense, the Trump/Noem plan does allow my wife to endorse political candidates from her pulpit… although Scripture, Luther, and her conscience will continue to absolutely forbid her abusing her call in that fashion.)
Adjusting Standard Deduction by Chained CPI: As indicated by the original tax blueprint, the Trump/Noem plan reduces the annual cost-of-living adjustment to the standard deduction and other tax parameters. A change published yesterday to the tax plan would increase the standard deduction each year by the chained inflation figure instead of the traditional inflation figure. The chained CPI-U usually runs a couple tenths of a percentage point behind the traditional CPI-U. Based on BLS figures, I calculate that since 2000, the traditional CPI-U has risen 2.2% each year, while the chained CPI-U has risen 1.9% each year.
Increasing the standard deduction by that traditional CPI-U average would raise the standard deduction for 2018 to $24,517. Using chained CPI-U would raise the standard deduction to $24,915. The chained adjustment thus leaves $63 in our taxable income, meaning we’ll pay another $8 in tax than we would under current policy. That’s not much, but by 2040 (and at this rate, we’re never retiring), chained adjustments produce a standard deduction nearly $2,300 smaller than the traditional inflation rate produces, saddling us with an additional $270 in federal income tax.
Net Effects: For my family, repeal of the personal exemptions subjects more money to taxes than the increase in the standard deduction shields. The increased Child Tax Credit plus the new Family Tax Credit outweigh the increase of the bottom tax rate for the first six years of the plan, but in 2023, when the Family Tax Credit goes away, the higher bottom rate wins out and costs us more. As the bill stands now, the Trump/Noem tax plan saves this middle-class family $326 on our 2017 taxes, but takes $274 away from us starting in 2023 that current law would let us keep.
Update 15:17: Calculating the impact of the change from traditional to chained inflation measures makes the picture worse for us. If I project out to 2041 and assume our income and deductions grow at the lower chained CPI-U, under current tax policy (with personal exemptions indexed to traditional CPI-U), we will pay $302,000 in federal income tax over 24 years. Under Trump/Noem, with tax parameters indexed to chained CPI-U, we will pay $323,000, $21,000 more. Our six years of Trump/Noem savings ranging from 3.7% to 2.5% are gobbled up by subsequent years of paying more than 9% above current rates. Over 24 years, the Trump Noem plan raises our cumulative taxes 7%.
But wait. You could both go to to work for Trump Casinos in Deadwood. Your wife could quit her piddle church job to pray for the gamblers to lose big-ly, while you could use your math skills to provide algorithms to the Trump Organization’s gambling enterprise. Both of you would increase your incomes to mega-millionaire status. Then you would get a uuuuuge tax cut. See, you have to think like Trump to get your tax cut.
True, but the Deadwood casino industry is looking a little shaky. Costner folded this summer, and now Nebraska-owned Celebrity Hotel & Casino is filing Chapter 11.
Anyone else care to run your numbers through the Trump/Noem wringer, see if you come out ahead or behind?
But by eliminating the alternative minimum tax, Trump lowers his own taxes by more than $10 million per year. (Trump would have saved $31 million in 2005 alone without the alternative minimum tax.) And by eliminating the estate tax Trump’s kids won’t have to pay anything on their inheritance.
“I’m the only one that matters.” Donald Trump
I’m planning on being a Social Security “taker,” sponging off you guys with tax-free money. I plan on repaying the Trump Administration for the handout by filing lots of comments and administrative appeals on the crap they are trying to pull.
I’ll supplement my income through tax-free investments and some off-the-books side jobs for cash. Don’t tell the IRS.
I am being very careful to use tax-exempt money to make up the difference between my expenses and what SS pays. I may take a part-time job next year, but I don’t want to make a lot, just something to keep me busy but not pay anything in taxes. I thought I’d like to get into growing weed in my community garden and sell it for big bucks, but that’s illegal, so I’ll probably just keep growing my beans and tomatoes and assorted other veggies. If I eat them myself, IRS doesn’t get a cut. I like to live off the fat of the land, so to speak. Now if a win the Powerball jackpot, I’ll rethink things.
Scared me, Mr Pay. Yer first paragraph had me thinking you copied and pasted Old Serge, the Cossack troll. :)
The chained CPI has been in play before and is basically a way to cut the amount of inflation in pension, Social Security, and disability payments.
The cost of the “market basket ” used in a regular CPI includes most of the same items every year and the rise in prices determines that rate of inflation.
The chained CPI works on the principle of the rising cost of some items will move buyers to a cheaper alternative. One example is the cost of hamburger. The chained CPI makes the assumption that an increase in the price of hamburger of fifty cents a pound will cause the consumer to buy less hamburger and buy a cheaper meat such as chicken or pork thus keeping the rate of inflation down.
I am not a fan of the chained CPI.
Cory,
I notice that in your excellent analysis of Trump’s tax plan that you made no mention of the “$4000 raise” that the White House promised last week.
The White House mouth piece, Sarah Sanders, even asked what Americans would do with that raise.
Among the most amusing comments was that they would donate their $4,000 raise to anyone that ran against Trump.
I won’t argue that this bill has corporate tax cuts as its main priority. However, if I understand correctly, the family flexibility credit will provide an additional $600 per year in savings through 2022.
Family Flexibility Credit—interesting! If each spouse can claim it, that’s $600 for a married couple. Chris, do you know if what criteria will apply to that credit? I see it’s nonrefundable, so it doesn’t put new money in the pockets of lower-income families with kids.
Roger, does that alleged $4,000 raise arise in public employment? School districts aren’t getting any tax breaks, so they won’t have more money to pay teachers.
I will save $3,000 the first year, depending upon cap gains and distributions staying the same, but with the market taking off and the corporate tax cut I expect significantly more in cap gains and distributions as companies return profits to the share holders. I wish more of my money was in nontaxable accounts. The folks that are really lucky are those who have all their funds wrapped up in 401Ks, SEP, Tradition/Roth IRAs. As corporate distributions increase all that additional growth will be protected.
Here is an easy Trump Tax Plan calculator: https://www.calcxml.com/calculators/trump-tax-reform-calculator?skn=#results
Just compare it to your last years tax return.
I make no assumptions of additional growth. In my updates, I am factoring in only the traditional and chained CPI-U. Any assumptions beyond that are unsubstantiable voodoo economics.
I don’t know, because (1) this is just the original plan. Who knows in what form it will be when passed by Congress in some middle-of-the night closed-chamber session while Trump is tweeting some horrendous distraction so no one will pay attention to what Congress is doing. And (2) I have no idea what they will do with Ag. Farmers typically have property which makes them vulnerable to all kinds of taxes. Will they be as brutal with farmers with their cuts as they are with other middle-classers? (I’m making up new words.) (3) Will they still favor the wealthy who are able to hide and conceal their net worth with off-shore accounts and other atrocities?
So all in all, I haven’t much of a clue at this point but I don’t trust the buggers and sad to say, I’m a little bit on the paranoid side.
Relax. people. These are wingnut lies yer being fed. They don’t care about anyone except the koch bros. Any helpfor the bottom 80% is purely coincidental.
We can have nice things like health care, family leave, vacations, pensions and all those things that many of the civilized countries I visited last month have. We just need to pay for them.
Our taxes pay for relatively little compared to most of the developed world …… and we complain that they are too high, go figure.
We don’t need a tax cut. We need an elimination of the SSA “cap,” a healthccare (medicare) surtax and enforcement of corporate taxes.
Now we know what Putin wants with NOem/trump/Thune and Rounds, chaos https://www.theatlantic.com/politics/archive/2017/11/trump-just-got-caught-in-a-big-lie-about-russia/544886/
mike from idiocy: This is the greatest line you have EVER posted “Any help for the bottom 80% is purely coincidental.”!!!!
So, it just “happened” to be coincidental? Somehow you “think” is is just by pure luck 80% of the lower income is helped and that is somehow a bad thing”? What is wrong with your brain?
Maybe you should see a professional. I think you were Koch’d in the head.
What happened with the 1 trillion dollars that trump/NOem were gonna put into our crappy infrastructure? Here in South Dakota, our water delivery system, is not in such good shape. Some of them are and have been, to the point of capacity. I wonder if we realize that this tax giveaway to the wealthy (once again) will remove any hope that we have to improve our daily lives through infrastructure renewal. Oil pipelines are leaking as Lincoln County can attest too.
As Cory shows, more loss for the working folks while enriching NOem, Thune and Rounds will also have a substantial loss on the goods and services we depend on. Anyone know what effects this will have on Social Security? How about Medicare? https://www.thenation.com/article/the-gop-tax-bill-is-an-attempt-to-destroy-government/
This “tax cut cut cut” is exactly what Putin has striven for, the decline of functioning government to match his own failure in Mother Russia. Well played Putin, well played. Why do you think Russians are also in the street protesting?
Hey Cossack Troll- dig this- https://finance.yahoo.com/news/trumps-tax-plan-just-got-180000645.html
The cream goes to the top and the leftovers are picked through before they get close to the people at the bottom that need help’
On top of wingnuts taking 193 billion out of foodstamps in the next 10 years, they want over 600 billion from Medicaid and they are planning to takeaway heat assistance for the poor.
Taxcuts will cost nearly 5 trillion over 10 years with nearly 3 trillion dedicated to the top plus another 80% of the remaining income taxcuts. That leaves about a buck and a half for the upper middle class and the rest have to fight over licking the bowls.
Since you aren’t, by far, the sharpest knife in the drawer and yer elevator doesn’t go all the way to the top, etc. I fully expect you to pull an all night one lonely troll orgy of ecstasy that the wealthy made out so well. Don’t let me down, chump.
Roger, donating to the Resistance sounds like a good plan to me! We need this tax cut to produce some political stimulus.
But if we go on a political donation spree with the sum of minor cuts some of us common folks may get from this corporate tax bill, we’d better make sure the people we back all win and rework this tax bill (assuming it passes). If Trump/Noem takes effect and we don’t change it, the $1,743 dollars my family saves over the next six years will disappear by 2025: in tax years 2023, 2024, and 2025, my family will pay $2,408 more in taxes than the current system would impose.
Robin, I embrace your skepticism. I recognize that my fervent calculations may all be rendered obsolete tomorrow by surprise amendments happening outside of public committee hearings.
Nonetheless, we have to race along, checking them as best we can with the information available, and trying to inject facts into the debate.
http://www.politifact.com/truth-o-meter/statements/2017/nov/03/paul-ryan/would-house-gop-tax-plan-save-typical-family-1182/
Ryan, like all lying wingnuts, glosses over important parts of his rosy scenario for families of four and their taxes. Mainly, the savings is a one year dealie and they will end up paying more in the future.
Commerce Secretary Wilbur (Mr. Ed’s owner, and Mr. Ed’s lookalike from the back end) still does profitable business with our new owners, the Russians https://www.nytimes.com/2017/11/05/world/wilbur-ross-russia.html?emc=edit_na_20171105&nl=breaking-news&nlid=26013750&ref=cta&_r=0 Thune and Rounds are full supporters of Wilbur so there is that. How many rubles do you suppose these two got for the betrayal?
Pulled up last year’s 1040. My family owed $14,510 in taxes.
Under the new tax plan it’ll be $10,579, or $3,931 more in our pockets.
That’s a lot more we can put away into college savings accounts for the kiddo.
If you used Old Serge’s tax link, mayhaps a background check of the company might be in order. Just saying.
And it doesn’t do anything for those of us under 15 grand a year.
Holy cow, Wayne! Is that the larger Child Tax Credit kicking in? The new 12% bottom rate doesn’t catch up with you?