In my previous article I broke down the major changes to the tax code that Trump is proposing and showed that the major beneficiaries would be the poor and the middle class. One of the difficulties with tax is that sometimes abstract arguments do not work and we have to see how it benefits us directly. For today I will try to list some scenarios to show how it would benefit people at different income levels.
Before I begin I realize that every person is different so it is very unlikely the scenarios I offer will match your situation directly. You may have some additional credits or deductions I do not list. There are two facts that I want you to keep in mind as you go thru this. First in 2016 75% of all people who filed income tax opted for standardized deduction not itemized ones. Second in 2016 almost half of Americans working made 30000 or less.
Scenario 1: Single Making 30000
This would most likely describe a younger person starting out. Under President Obama the standardized deduction was 6300. You would subtract that from 30000 giving you a taxable income of 23700. This puts you in the 15% tax bracket. Your first 10350 would be untaxed. The next 9275 at 10% and everything else at 15%. Under Obama your tax liability would be 1538.75.
Under President Trump your standardized deduction would be 15000 giving you a taxable income of 15000. This would place you in the 15000 tax bracket which means you pay 0%. Your tax liability would be 0 under President Trump.
Scenario 2: Joint making 45000
This would most likely describe a struggling family. Under President Obama the standardized deduction for joint filers was 12600. If you subtract this from 45000 you get a taxable income of 32400. The first 10350 would be untaxed. The next 9275 would be at 10%. Everything else at 15%. Under Obama your liability would be 2843.75.
Under President Trump the standardized deduction for joint filers is 30000. Subtract that and it leaves you with a taxable income of 15000. This puts you in the 0 tax bracket which means you pay 0 under President Trump.
Scenario 3: Single making 60000
Estimates for what make you middle class vary by city. The average I got is 60000. Depending on where you live this could be higher or lower. Under President Obama your standardized deduction would be 6300 leaving you with taxable income of 53700. Like earlier the first 10350 is untaxed. The next 9275 at 10%. The next 28375 at 15%. The rest of the 5700 at 25%. This gives you a total liability of 6608.75 under President Obama.
Under President Trump you would have a standardized deduction of 15000. Leaving you with a taxable income of 45000. The first 15000 is untaxed. Everything else is at 12%. Under President Trump the liability of a single middle class person would be 3600. Almost half.
Scenario 4: Joint Making 100000
The average for a middle class family seems to be 100000. Under President Obama you would have a standard deduction of 12600 leaving you with a taxable income of 87400. As always the first 10350 is untaxed. The next at 9275 at 10%. The following 28375 at 15% and the remaining 39400 at 25%. Under President Obama the liability of this middle class family is 15033.75.
The same family under President Trump would have a deductible of 30000 leaving taxable income of 70000. The first 15000 is not taxed. The next 37500 gets taxed at 12% and the rest at 25%. Under President Trump the liability of the same middle class family would be 8875.
As you can see for most people earning 30000 and below they would find themselves paying no taxes and for the middle class would have their tax burden halved.