Funny thing happened earlier this past week: after being a relatively inactive user for the past 9 years, I decided to submit a recent NY Times piece outlining the proposed US House of Representatives’ Tax Plan to one of my favorite subreddits, /r/financialindependence.
Outside of the daily discussion threads, this subreddit’s typical activity is far less than what the 300,000+ subscribes would suggest. So it came as a little bit of a shock that my post garnered so much interest (almost 1000 “upvotes” and just as many comments).
Perusing the comments sections, I helped some people understand the US Tax Code a little bit better and outlined some obvious winners and losers of the proopsed changes. In a nutshell: if your household* taxable income (less your standard pre-tax contributions such as for 401(k) and HSA plans) is around $90,000 — enough to cap out the lowest proposed tax bracket of 12% — , you have children, and you have previously been filing using the standard deduction then, CONGRATULATIONS, you are the biggest winner of the new tax plan.**
As for the losers, if you are a dual-income household who make around $200,000 to $400,000, have children, and have previously heavily itemized, you are the biggest losers and will, most likely, be paying more for taxes. This mostly describes households in high-cost of living areas (California, New York City, etc…) that are traditionally blue-state stalwarts.
Anyways, I highly recommend people who pay taxes educate themselves on how exactly the bulk of the US Tax Code works (if you are a “normal person,” it’s actually not too complicated) and judge for yourself how the proposed changes would affect you.
* This is presuming you are married filing-jointly. If you are an individual, cut the income levels approximately in half for the big winners/losers.
** Note: the top 1% (or more specifically, the top 0.2%) are truly the biggest winners as the estate tax repeal would far exceed any modest benefits the “middle class” would get from the new plan (also the elimination of the Alternative Minimum Tax is a huge benefit to certain wealthy people who make specific types of income).