Donald Trump’s tax proposal is detailed, but it doesn’t necessarily match what he said it would do. He proposes a three-bracket system – with rates of 12 percent, 25 percent and 33 percent – down from the current system, and the removal of the head-of-household tax-filing category. The standard deduction would be $15,000 for single individuals, an increase from $6,300 currently, and $30,000 for married couples filing jointly, an increase from $12,000.
According to NYU law professor Lily Batchelder, Donald Trump’s plan would increase taxes for many families, with some of the most significant increases applying to single-parent families “because of the repeal of the head of household filing status and personal exemptions.” The Tax Policy Center asserts that, “If you’re a low- or moderate-income single parent, you’re going to get hurt.”
– A married couple with an income of $50,000 and two school-age children with no childcare costs can expect a tax increase of $150.
– A single parent with an income of $50,000 and three school-age children with no childcare costs can expect a tax increase of $1,188.
– A single parent with an income of $75,000 and two school-age children with no childcare costs can expect a tax increase of $2,440.
The increase in taxes may stem from the proposed elimination of the $4,000 per-person exemption. Yet Trump economic advisor Steve Calk maintains that the loss of the exemption is offset by other changes in Trump’s plan. A family earning $50,000 annually, says Calk, “[with] childcare costs [of] $7,000 or $8,000 a year [will] save 35 percent on their net tax bracket.”
Ultimately, economists continue to disagree on whether Trump’s plan would be good for the economy. According to the Tax Policy Center, over the first 10 years, the government could potentially lose revenue of $6.2 trillion, thus producing significant budget deficits that would hurt the economy.
While income taxes could potentially decrease and thus help those in debt by allowing them to sock away more money and reduce their IRS exposure, if this happens, lower-income taxpayers might suffer.
One other element of Trump’s tax policy is worth noting: His proposed plan would completely eliminate the federal estate tax. Only the wealthiest taxpayers, less than 1 percent in the U.S., now pay that tax. Removing it would result in an even greater concentration of wealth in the country.
Still, Trump is unknown and unpredictable. To hedge against uncertainty and making your debt worse during this time, avoid speculations and wild ideas until you have a solid understanding of the ways in which these policies will directly impact you. Further, he hasn’t released any information on how he will handle IRS collection matters. Our assumption is there won’t be many changes to come, but we cannot predict the future. If you owe the IRS and need assistance, please do not hesitate to call us at 720-398-6088.