Last week I was pleased to see the Republican unified framework released to reform our tax code. While a lot of difficult decisions still need to be made, having this framework agreed upon is an important first step to overhauling our broke tax code.
Under the GOP conference plan announced this week, more income for more people will be taxed at a rate of zero. Tax reform means American’s will not pay tax on the first $12,000 they earn. For married couples, they won’t pay a dime on their first $24,000 of income. This is because we are doubling the standard deduction for individuals.
Currently, 70 percent of the U.S. population takes the standard deduction, according to Tax Foundation. However, under current law, 2017 standard deductions are only scheduled to be $6,350 for individuals and $12,700 for married couples filing jointly.
By increasing the standard deductions, it is anticipated that many more American’s will soon take the standard deduction rather than itemizing. Likewise, more Americans will have less income that is taxed.
To explain the impact of this a bit further, let’s consider two Ohio specific examples.
The median household income for an Ohio family is $51,075, according to a U.S. Census Bureau’s ACS 1-year survey. With the proposed increases to the standard deduction, this family would only pay tax on $27,075.00 of income, and that’s before taking any other deductions and credits, such as child tax credits, are taken into consideration.
The median income for millennials in Ohio is $20,000.00, according to Business Insider. With proposed increases to the standard deduction, these taxpayers just starting out in their careers will only pay tax on $8,000.00 of income, if no other credits or deductions are applicable.
Of course the next question, after understanding how the proposed standard deductions will work, is how the new rate brackets will interact and affect taxable income.
Under the Republican plan, everyone currently at a 10 percent federal income tax rate will pay $0. They will pay no federal income taxes. And those paying 15% today will only pay 12 percent or less. It will be like getting in an elevator and going down a floor. We want to lower the tax brackets at every level for those in the middle-class and those that want to be in the middle-class.
The wealthiest Americans will be taxed in a way that provides even more tax relief for working families. We are eliminating a lot provisions special interests use to decrease their tax bill, so we can simplify and go lower for everyone else.
I want Ohioans to know my door is open to answer any questions you have about tax reform.
A lot of details are still to be determined, but the overall goal is to shape the law so it makes hard-working Americans better off. We want you to keep more of your hard-earned paycheck.
My door is open to answer your questions and concerns. Contact me at email@example.com