As House Republicans began to unveil details of their major new tax plan on Thursday, many people have been left wondering, “What exactly is the Republican tax plan?” Put simply, here are seven of the many things it would do.
Fewer income tax brackets
Currently, there are seven income tax brackets that Americans can fall into, according to CNN Money. The new bill aims to reduce those to four. Here’s what the tax brackets would look like:
— 12%: That’s the tax rate for individuals who make up to $45,000 a year and married couples who make up to $90,000 a year (as long as they file jointly.
— 25%: That’s the tax rate for individuals who make more than $45,000 a year and married couples who make more than $90,000 a year.
— 35%: That’s the tax rate for individuals who make more than $200,000 a year and married couples who make more than $260,000 a year.
— 39.6%: That’s the tax rate for individuals who make more than $500,000 a year and married couples who make more than $1 million a year.
Households that make less than $24,000 will not be taxed, according to the Chicago Tribune.
Huge boost to standard tax deduction
Tax deductions shrink how much of your income is taxable. In other words, bigger deduction means less of your money taken for taxes.
The new tax plan nearly doubles the size of the standard tax deduction to $12,000 for individuals and $24,000 for married couples. This only applies, of course, if you don’t do itemized deductions.
No more personal exemptions for yourself and your family
Currently, you can deduct $4,050 from your income (shrinking your income from a tax perspective) for yourself, your spouse, and each one of your dependents, according to Turbo Tax. Under this new plan, that exemption goes away.
Bigger tax credit for children
On the other hand, the child tax credit (money given back to you) for each of your children will increase from $1,000 to $1,600. Plus, the child tax credit would now apply to people with larger incomes than before. You would still qualify for it if you’re a single parent making $115,000 a year or married parents making $230,000 a year.
No more Alternative Minimum Tax
Back in the 1960s, the Alternative Minimum Tax was put in place to make sure that despite all the other deductions that wealthy people could qualify for, they would still have to pay their “fair share” of taxes, according to The Motley Fool. This new plan would eliminate that.
Goodbye to the estate tax
The estate tax only applies to very wealthy estates and only affects 0.2% of them, but the new plan would get rid of it in 2024.
Major tax cuts for corporations
Two-thirds of the tax cuts in the bill are for businesses taxes, which would see a total cut of $1 trillion, according to the New York Times. The corporate tax rate in the U.S. is about 39%, according to NPR, the highest in the world. But the new tax plan would lower it to 20%, CNN reports.
House Speaker Paul Ryan made clear, “With this plan, we are making pro-growth reforms, so that yes, America can compete with the rest of the world.”
He also said, "It's very clear and obvious that the whole purpose of this is a middle-class tax cut. And more to the point, we need to get faster economic growth."
The speaker estimates that families, on average, could save $1,182 a year with this new tax code in place, according to the Chicago Tribune. Trump has referred to the proposal as “one of the great Christmas presents” for Americans. He’s hoping the Senate will pass it before the close of the year.
What do you think of this? In related news, the Republicans’ new bill could also have a major impact on your local church.