JLF’s Joe Coletti offers a primer on key components of proposed federal tax relief for middle-class families and businesses. He explains why the plan would make taxes simpler for most and offers suggestions for improvement.
First, it reduces the number of tax brackets from seven ranging between 10 percent and 39.6 percent, to three brackets of 12, 25, and 35 percent. Because most people use the tax table, the change in tax rates will not be as noticeable on its own.
What people would notice is an increase in the standard deduction, elimination of personal exemptions and most itemized deductions, and a larger child tax credit. The standard deduction would increase from $12,600 to $24,000 for married filing jointly returns (half those numbers for single filers). This sounds great, except families with two or more children would have received $12,150 in exemptions, which more than offsets the standard deduction increase. Those who currently itemize their deductions would generally receive even less benefit.
Get the full sense of the federal tax reform proposal by reading Joe’s full account here.