Trump’s Proposed Income Bracket Could Rattle Low and Middle-Income Americans
The average real estate investor makes far more than the average American, with one-third making more than $75,000 per year. One former mogul, however, stands out as one of the richest in the world. President Donald Trump has taken a massive pay cut to become the leader of the free world and has proposed a willingness to lift middle America out of poverty by boosting industry and providing the biggest corporate tax breaks since the Reagan administration.
Since Americans are preparing to file their taxes for the 2016 calendar year, this is becoming more and more pressing. Under ordinary income tax brackets, the more taxable income you earn, the more money you owe the IRS. Under the current tax bracket system, the majority of Americans fall within the 15% range — or the second lowest — and make between $13,351 and $50,800 per year.
President Trump has proposed reducing federal income tax rates from seven brackets to just three: 12%, 25%, and 33%. Under this system, the poorest Americans would pay more in income tax, while the top two income brackets would get a significant cut.
“For many middle-income taxpayers, the new standard deduction [under Trump’s proposal] may exceed their itemized deductions,” said Timothy Speiss, chairman of personal wealth advisors at accounting firm EisnerAmper. This, in turn, would allow them to have a higher tax deduction.
But this isn’t all cut-and-dry, of course. And not all middle-income taxpayers would benefit.
The plan also calls for the repeal of personal exemptions for taxpayers and their dependents, while also proposing to repeal the head of household filing status. Because of this, single parents with children will have to pay more in income taxes, as will married households with more than three dependents.
Some basic income advocates are optimistic about where these tax reforms will lead.
“People feel uncertain and anxious about the future,” Jim Pugh, CEO of Share Progress and co-founder of the Universal Income Project. Because Americans are hungry for change, Pugh believes that Trump may be able to use the uncertainty to project nationwide income reform and help kickstart the otherwise grassroots movement toward universal income.
But many others are far more skeptical. Trump has said time and time again that he wants to bring industry and manufacturing back to the U.S. but has failed to mention the threat of automation.
“Enacting basic income would help to revitalize parts of the country hit hardest by outsourcing and automation by spurring entrepreneurship in those areas,” Pugh also says. In theory, universal income would help improve the business sector and help lift people out of poverty.
Being just a couple weeks into Trump’s administration, it’s hard to tell which direction he may lean toward. Under the proposed tax bracket, it appears that the majority of middle-income Americans may be spared, but the poor will continue to suffer as they have before, maybe even more so.