Wouldn’t you have to be upper (not middle) income to have those credits phased out and be full pay for college?
But note that individual taxes need to come from either the plutocrat class or the upper income non-plutocrat class, since that is where the bulk of the realistically taxable income is (the middle and lower income taxpayers may not be able to have their taxes raised too much without a lot of pain and complaints to legislators). So you, and probably most of those on these forums who self-describe as “[upper] middle class”, are the one who have to keep paying taxes if the plutocrat class’ taxes are lowered.
Our kids are grown and support themselves. So far as I can tell, it looks like with this plan it is possible we’ll pay a whole lot less taxes this next year than I had anticipated. In that case, I’m setting up some kind of savings for the grandchildren with the money that would have gone for taxes.
And since some of the income will come from inherited investments by my parents, grandparents, etc and I’m passing it to my grandchildren, it is easy for me to see the problem with the tax structure in not helping the middle class to get ahead.
If the federal inheritance tax applies to you, you’re not really middle class.
I live in a high income tax state, so I expect this will raise my taxes significantly, even if there is a cut in the bracket–but I can’t tell from the charts I’ve seen if we’d get a cut at all.
@ucbalumnus I suppose by some standards we are upper income but your post mentioned "The highest income people (> $418,400 single, > $470,700 married joint) will get a tax cut due to the reduction of the top marginal rate from 39.6% to 35%. " and we dont make over 470k so we arent in that group that will get a cut.
I dont mind paying taxes, as I mentioned the Obamacare tax doesnt bother me because we get a break after reaching the social security limit, which is more than the Ocare tax, and I dont mind giving a bit extra to help with healthcare.
However, I am ticked that we get hit with the AMT, given our income is strictly W-2, and we didnt live in a high tax area, so our deductions werent astronomical.
We moved the first of the year, so I am renting now. We wont itemize next year, however we do still have two dependents, one recent grad and one in college. If they keep the proposed std deduction and get rid of the exemptions thats an increase, and not just for high earners.
Charitable deduction might not be outright eliminated, but by doubling the standard deduction, it will be weakened significantly, and it will have big (negative) impacts on charitable giving. Charitable non-profits would take a devastating hit under the proposal.
I suspect and hope that eliminating the deduction for state and local taxes is just a bargaining chip. It makes no sense to have to pay taxes on taxes.
The LA Times reported this morning that also under discussion was eliminating the mortgage deduction on mortgages over $500,000. I don’t see that being opposed since allowing deductions over that seems like a tax break for the wealthy.
In general, though, I think my modest earning son would get a tax break.
As someone who lives in a high-tax state (California), I am concerned about the possibility of not being able to deduct state or local taxes. That would be a big tax increase for us.
OTOH, (something I did not know from the article) 88% of the benefit for state and local tax deductions goes to those earning over $100,000. Which makes sense since they have the fanciest houses and thus the higher property taxes and higher incomes.
Lots of tax deductions and credits benefit the upper income taxpayers the most (though some phase out at plutocrat-level incomes). For schedule A deductions (home mortgage interest, state and local taxes, charitable contributions, and a few other things), lower income taxpayers are less likely to have enough of them to get over the standard deduction.
I was listening to a couple interviews with proponents and opponents of the tax proposal this morning, and honestly some of the talking points reminded me of this often-topical line delivered by comedian Will Durst several years ago:
Guy on the radio this morning:
" For most people, taxes paid will be about the same." But in the next breath, he said “But this will blow a huge hole in the deficit”. Huh?
Most people are not in the plutocrat class or inheritors of large estates who will see substantial tax cuts. But tax cuts for those small numbers of plutocrats and inheritors of large estates add up to a large tax revenue reduction.
There are also proposals related to the corporate income tax.
We’re wondering it the American Opportunity Tax Credit will be affected. That really reduced our taxes the last couple of years. Being in California, this first draft of the plan looks like it would increase our taxes, but there are no details so we can’t really tell. Frankly, we don’t feel like we need a tax cut, we just want the most efficient use by the government of the taxes we do pay.
$500,000 as a cap on mortgage interest deductibility has a lot different meaning in New York City, Los Angeles, Boston, or San Francisco than it would in Iowa. If my daughter could find a two-bedroom apartment she liked that she could get with a $500,000 mortgage, she and her fiance would be living in it.
There’s no question that doubling the standard deduction makes things like charitable contribution and mortgage interest deductibility moot for the vast majority of Americans. (For me, and for lots of people I know, the AMT currently makes state tax deductibility a false promise anyway.) But I am not convinced that will really hurt charities. They will still have their big donors, and I don’t think smaller donors are that meticulous about the tax benefits anyway. People contribute vast amounts to GoFundMe pages that are not tax deductible.
In any event, I am disgusted with the dishonesty of the PR behind this program. If you listen carefully, you will figure out that what’s in it for the middle class is the idea that there will be tremendous economic growth and they will get jobs with higher wages. The last time there were big corporate tax cuts like this, it all went to stock buy-backs. People with family businesses worth $10 million and more will get huuuuge benefits from this program, if it’s enacted. So will childless couples in low-tax states. Everyone else, not so much.