Saturday, October 20, 2018

The effects of this year's tax cut

Newsweek has published an article entitled "Trump's tax cuts benefit rich Americans, not middle-class families, voters say by two-to-one margin in new poll."

If that that is what most people believe, it is because they have accepted claims made by politicians, because the assertion is simply untrue. Doing a direct financial analysis of the effects of the Tax Cuts and Jobs Act of 2017 tells another story entirely.

We have done the calculations for two hypothetical taxpayers, a single person with one child earning $70,000 per year and another single person with one child making $135,000 per year. The result of our calculation, comparing the 2017 tax year to the 2018 tax year, the first year the cuts go into effect, shows:

The 70K worker will have a 22.3% lower tax bill for 2018
The 135K worker will have a 15% lower tax bill for 2018

We show our work. We have posted the calculation at https://is.gd/OAFWiW

So you can believe the fictions disseminated by politicians, or you can believe the result of an actual calculation and comparison.

You can argue about whether the country can "afford" a cut in personal income taxes. You can argue about whether the taxes paid by those taxpayers who earn more than you do should be higher than they are. But you cannot deny that most middle-income Americans will have a lower tax bill next spring as a result of the TCJA.

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