BY:
The final version of the Tax Cuts and Jobs Act, passed by both the House and the Senate, will reduce taxes for nearly every household, according to an analysis from the Tax Foundation.
“To help provide a sense of how the Tax Cuts and Jobs Act would impact real taxpayers, we’ve run the taxes of eight example households,” the foundation explains. “Our results indicate a reduction in tax liability for every scenario we estimated, with some of the largest changes in after-tax income accruing to moderate-income families with children.”
The foundation says each type of family it scored had realistic characteristics so it could show how the bill’s individual income tax provisions would impact various types of families with different incomes.
For example, a single individual who earns $30,000 with no children currently pays $4,331 in taxes. Under the revised tax plan, this individual would see her taxes decline by 9 percent and would pay $3,953. After taxes, this individual would see income rise by 1.26 percent.
A single individual earning a higher salary of $75,000 with no children will see his taxes reduced by 11 percent and after-tax income would grow by 2.37 percent. Under current law, this individual pays $16,104 in taxes, which would be reduced to $14,327 under the newly amended tax bill.
Another single individual with two children and earning $52,000 will see a 36 percent reduction in taxes and a 3.64 increase in after-tax income. This individual would pay $5,198 currently, but would pay $3,306 under the Tax Cuts and Jobs Act.
A family with two children earning a single income of $85,000 would save 20 percent on their tax liability, seeing their taxes decline from $11,035 to $8,782.
Another family with two children earning two salaries totaling a combined $165,000 will see their taxes decline by 8 percent and their after-tax incomes would rise by 1.35 percent.
A high-earning married couple with two children earning $2 million who have a $2.5 million home will see their taxes decline by 3 percent and their after-tax income would rise by 0.95 percent.
“All of our sample filers receive a tax cut, but the size of that reduction varies,” the analysis explains. “The significantly higher standard deduction, combined with lower marginal rates and a more generous (and more broadly available) child tax credit, drives the reductions in tax liability for low- and middle- income filers.”
“A reduction in itemized deductions limits reductions in tax liability for upper-income earners, though these filers benefit from the modified alternative minimum tax and lower top marginal rates,” the report said. “As these sample taxpayers demonstrate, most taxpayers across the spectrum experience lower tax bills under the Tax Cuts and Jobs Act, albeit temporarily.”
