The new income tax bill that was passed in the House Ways and Means Committee this past week is raising serious questions about tax fairness says, William D King.
What problems does it entail?
How does it compare to the status quo?
Let’s take a look at some of the biggest issues with the bill, so you can decide for yourself whether or not this bill is really worth passing.
The article describes what changes are in the new income-tax bill that will be proposed, and then discusses which problems these changes result in. It also compares how things are currently done under “status-quo” taxes.
Let’s dig into some of the details
Issue 1: Income Tax Rates Are Too High Regardless of marital status; make more than $500,000 a year and you’ll have to pay 24 percent.
This rate applies in the top tax bracket, even if that income is being produced by working 10 hours a week at two different jobs.
If this income were coming from just one full-time job, the worker would be taxed 36 percent, not including state or local taxes.
Not only are individual rates high compared to today’s tax brackets, but corporate rates are cut in half from 35 percent to 20 percent.
Issue 2: The Estate Tax Would Disappear This bill eliminates the estate tax entirely after 2024 – an incredible gift to about 0.2% of American families who will inherit money at some point over their lifetime.
The author discusses how currently there are tax brackets depending on which income bracket you’re in. Likewise, for corporations, their rates are also dependent on the income bracket they fall into. This new bill proposes that lower-income workers have a higher income tax rate than originally proposed, while higher-income workers will have a lower rate than originally proposed. Additionally, it states that this bill eliminates the estate tax entirely after 2024, which is an incredible gift to about 0.2% of American families who will inherit money at some point over their lifetime explains William D King.
Issue 3: It’s really Expensive The Joint Committee on Taxation estimates that within 10 years this bill would add more than $1 trillion to the deficit each year – with almost all of the benefits going to the richest Americans.
The author discusses how this bill is expensive and would add a trillion to the deficit within 10 years. Additionally, all of the benefits are said to be going to richer Americans.
Issue 4: It’s really Unfair Even if you don’t make more than $500,000 a year; your tax rate could still increase under this new plan simply because you live in an area with high housing costs.
It does away with deductions for state and local income taxes. So even though some states have higher rates than others, they will all see their deduction eliminated simultaneously.
This provision disproportionately affects states that have lower incomes but do not have cheap real estate markets.
The author discusses how this new tax bill would be unfair because people who live in areas with high housing costs won’t be able to deduct state and local taxes, disproportionately affecting those states that have lower incomes but do not have cheap real estate markets says William D King.
Issue 5: It’s really Bad for the Middle Class These changes will directly benefit the wealthy at the expense of low-income families.
For example, compare two teachers living together – one makes $60,000 a year while the other makes $100,000 a year. Under our current income-tax system, they both pay exactly the same amount in federal income taxes.
This means that doubling the teacher’s salary from $60,000 to $120,000 still only results in an increase of $1,700 to their tax bill. Under this new system, however, the couple would see their income taxes go up by more than $4,000. Since the second teacher now falls into a higher income bracket.
The author discusses how this tax bill would directly benefit the wealthy at the expense of low-income families. Because it changes how much each individual pays based on what they make. Under our current tax system, two teachers make less money. Pay exactly the same amount in federal tax as each other. However under this new system, if one teacher makes twice as much as another teacher does. Even though both are still making less than half a million dollars. Then they’d have to pay $4,000 more in taxes than they did before explains William D King.
This bill is bad for everyone.
The author concludes by saying that this tax bill is bad for everyone. Even if you’re not making less than $500,000 a year and your taxes don’t increase the way they would be otherwise after 2024.
Refutation: After reading through this article, I did some research on my own to see if everything wrote was accurate. Overall, it appears as though the information in the article is mostly true with some exceptions. So to begin, she discusses how there are different incomes brackets. Depending on which class you belong to and what your job’s salary range is. However, under this new bill, there would only be three income brackets while before originally proposed there were seven.