What is the Trump Tax Plan?
One of the campaign promises by President Donald Trump was the Trump Tax Reform that he introduced once he won the election. One year after he won the 2016 United States presidential election, President Donald Trump signed the tax plan.
The new tax law changes under the Trump Administration will benefit business owners with the largest businesses receiving the highest tax breaks. It initially promised to bring convenience to the taxation system in the United States, but critics of the Trump Administration stated that the Republicans did not fulfill their promise.
They said that the taxation system has become more complex, with only a small percentage of the American public understanding it. However, the Trump Administration dismissed such claims saying that the American public would easily understand the new tax brackets after they have eliminated deductions and made the bracketing simpler than ever.
Many people still have inquiries about the nature of the tax plan, and here are some of the most popular questions about the taxation reform signed by President Donald Trump last December 22, 2017.
When Will the Tax Plan Take Effect?
According to the documents signed by the United States president, the reforms based on the tax plan would take effect on the first day of January 2018. However, there are some aspects exclusive to the tax plan that will not be realized until the year 2019.
People are eagerly waiting for the tax reform because of the promises stated by the Republicans, and they are looking forward to the new tax brackets that will simplify the way they pay their taxes. America’s top companies, who have operations abroad, had also stated that they would be supporting the law once it took effect on January 1, 2018.
What Changes Will Stand Out on the New Tax Plan?
Americans are divided into two main categories whenever they file their taxes – single individuals, and married or joined filers. These categories are further divided into seven brackets and based on the new tax plan, those who are earning higher will experience the most changes in their tax cuts.
For example, under the single filer category in the old system, taxpayers would have to pay a 10% tax rate if they are earning $9,525 and below annually. For those who are earning around $9,526 to $38,700 annually, they would need to pay a 15% tax rate. Those who are earning around $38,701 to $93,700 annually would need to pay a 25% tax rate.
Earners who are posting $93,701 to $195,450 annual income are required to pay a 28% tax rate. Those who are earning $195,451 to $424,950 annually will be required to pay a 33% tax rate. A 35% tax rate is required for those who are earning $424,951 to $426,700 annually. Lastly, those who earn beyond $426,701 are required to pay a 39.6% tax rate.
In the new tax bracket, the amount required for those who are wondering about their income taxes are simplified, and the tax rates were changed to 10% for the first bracket ($0 to $9,525), 12% for the second bracket ($95,26 to $38,700), 22% for the third bracket ($38,701 to $82,500), 24% for the fourth bracket ($82,501 to $157,500), 32% for the fifth bracket ($157,501 to $200,000), 35% for the sixth bracket ($200,001 to $500,000), and 37% for the seventh bracket ($500,000 and beyond).
How Would the Government Implement the New Tax Plan?
The new tax plan will be implemented through standard deduction. The standard deduction for many people is expected to double, but exemptions and deductions will still be around. Those who have numerous dependents would still have to file their information so that a tax deduction can be provided.
Who Would Benefit from the Reform?
The wealthiest families in the United States are the ones who will benefit greatly from the tax reform. Their taxes will be lowered down to around 2%, allowing them to provide more benefits to their employees, or to direct changes within the company. Many businesses have also expressed their willingness to open up new plants in the United States, opening new job opportunities to the public.
How Can the Government Pay for its Deficit?
It is expected that the deficit from the American government will soar up to $1 trillion, but the people behind the tax reform are assuring the public that they will be able to close down the deficit within ten years after the reform has been established and move forward.
With more people earning a decent income, the percentage of those who will be climbing the bracket would also be greater, allowing the government to collect more taxes that would pay for their debts and deficits.
What are your thoughts on the Trump Tax Reform?