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How Trump's Tax Changes Will Impact You?
12-18-2016, 09:33 AM,
How Trump's Tax Changes Will Impact You?
How Trump's Tax Changes Will Impact You?

<p><em><strong>"Reduce taxes across-the-board, especially for working and middle-income Americans" </strong></em>- that was Trump’s campaign pledge. And now he is about to move into the White House and is backed by Republican majorities in both House and Senate, he has a real shot at fulfilling that pledge to the letter. <strong><em>So, what are the specifics of his plan, and how would it affect you?</em></strong></p>
<p><a href=""><img src="//" title="source:" width="600" /></a></p>
<p dir="ltr"><a href=""><em>As details</em></a>, <strong>first and foremost,&nbsp;<a href="" target="_blank">Trump’s income tax reform</a>&nbsp;is a simplification: he wants to cut down the number of tax bands from seven to three. </strong><em>But simplifying is not necessarily the same as reducing taxes. As this graph demonstrates,&nbsp;some taxpayers would definitely benefit from Trump’s tax reform – especially those at the higher end of the income scale. There are others, however, who would see their tax rates go up. Especially those on lower incomes.</em></p>
<p dir="ltr">The current income tax bands range from 10% and 15% at the lower end of the scale over 25%, 28%, 33% and 35% in the middle to the top band of 40%. Under the Trump plan, only three tax bands would remain: 12%, 25% and 33%.</p>
<p dir="ltr"><strong>This would be good news for everyone currently in the top two brackets (35% and 40%). </strong>These taxpayers would see their effective rate drop down to 33%, by 2 and 7 percentage points respectively. Conversely, the simplification would bad news for the taxpayers in the lowest bracket (10%). These would see their effective tax rate go up by 2 percentage points, to 12%.</p>
<p dir="ltr">But even in the middle, where many would stay in the same bands as before (25% and 33%), there would be <strong>losers as well as winners.</strong> Most people in the 15% bracket would drop down to a 12% rate. But a tiny sliver of top earners in this bracket (earning between $37,500 and $37,650) would have the misfortune of seeing their effective tax rate go&nbsp;up&nbsp;by 10 percentage points, to 25%.</p>
<p dir="ltr">A similar thing would happen to the old 28% bracket: taxpayers with incomes between $91,150 and $112,500 would drop three percentage points to 25%, while those between $112,500 and $190,150 would see their tax rate go up 5 percentage points to 33%.</p>
<p>All income amounts quoted here apply to single filers (left side of the graph); but the graph also shows the changes for joint filers (on the right). The calculation is pretty easy – double the amounts for the single filers.</p>
<p>The graph does not take into account other aspects of the Trump tax plan not directly related to the changes to income tax bands, such as <strong>the increase of standard deductions and a cap on itemized deductions, although of course these would also have an impact on net incomes.</strong></p>

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