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Since the release of the GOP’s long-awaited tax reform plan, a flurry of commentators have criticized it, saying it is a regressive plan that will raise taxes on a sizable portion of Americans.
What they often fail to mention is that their estimates depend on details of the plan that have yet to be released. As it turns out, different assumptions about those details can dramatically alter the projections of who gets a tax cut under the GOP plan.
Majority - Americans - Changes - Plan - Income
For a vast majority of Americans, the main changes they would experience from the plan would be to their income tax rate, the standard deduction, the personal and dependent exemption, and the Child Tax Credit.
So what do we know about how the GOP plan will affect these variables?
Tax - Rates
1. It would lower individual tax rates.
The GOP’s framework would lower rates and consolidate tax brackets for individuals. The three new income tax brackets (down from seven) are 12, 25, and 35 percent, but the framework does not specify what the income thresholds will be.
Plan - Rate
The plan also mentions that an additional fourth top rate may be added.
2. It would double the standard deduction.
Framework - Deduction - Standard - Deduction - Exemptions
The framework would almost double the standard deduction. It would do so by collapsing the additional standard deduction and personal exemptions into the one larger deduction available to everyone.
For married joint filers the deduction would be $24,000, and for single filers it would be $12,000. This means taxes would become much easier for many people because they won’t need to itemize or check frivolous boxes.
Child - Tax - Credit
3. It would expand the Child Tax Credit.
The framework would repeal the personal exemption for dependents, “significantly increase” the Child Tax Credit, and increase the income limits at which the credit currently begins to phase out.
Framework - Details - Items
The framework gives no further details on these items.
Taken together, it is still uncertain how...
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