Dotard Tax Plan Hurts The Middle Class According To Math And Common Sense
The dotard tax plan proposal would lower the corporate tax rate from 35 percent to 20 percent and reduce the top individual tax rate from 39.6 percent to 35 percent. The plan would repeal the estate tax, double the size of standard deductions for married couples and individuals and expand child tax credits.
Daniel Hemel is an assistant professor at the University of Chicago School of Law teaching tax law, administrative law, and torts. His breakdown of the dotard’s tax plan supposed merits makes it clear that it will negatively impact the middle class.
Dotard Tax Plan
The dotard tax plan appears to raise taxes by greater than $900 on married couples with two children in the lower-middle class which is defined as approximately $45,000 in income. Under existing law, a couple with two kids gets a standard deduction of $12,700 plus four exemptions of $4,050 making the first $28,900 is tax-free. Under the dotard tax plan, all of that is rolled into a $24k standard deduction meaning a married couple with one or two children, sees their bracket shrink. Additionally, under current law, the starting tax rate is 10%, while under the dotard tax plan, that rate rises to 12%. This means a family of four earning $45k would pay $1,610 under current law, and $2,520 under the dotard tax plan. To be fair, maybe the unspecified increase in child tax credit or other “add’l measures” will compensate for this, but we don’t really know.
In fact, based on what we know now, the income threshold at which a married couple with two kids begins to benefit from the dotard tax plan is approximately $79,583. Under existing law, that family pays 0 on first $28,900, 10% on the next $18,650, and 15% over that for a total of approximately $6670. Under the dotard tax plan, that family pays 0 on first $24,000, 12% over that for a total of approximately $6670.
This also assumes this family is taking a standard deduction. If this same family itemizes their deductions, they would see a tax increase. For example, many home owners in high-tax states easily itemize more than $20,000 plus exemptions for a total greater than $24,000.
It looks like the dotard tax plan eliminates the head of household status meaning single parents lose out even more. The head of household with two children and $35,000 in AGI (adjusted gross income) now pays $1358. If the dotard treats head of household as single, he or she pays $2760 under his plan as now laid out. Hopefully the final bill includes a large enough child credit increase to offset.
Where The Child Tax Credit Equals The Personal Exemption
A $500 child credit would be roughly equal to $4050 exemption for parents in 12% bracket (12% x $4050 = $486). However, at $500 the dotard tax plan is billing the child credit expansion as “relief” for working families when in fact it barely offsets repeal of exemptions. We don’t even know whether it’ll really be $500. The dotard has said he’d roughly double the standard deduction but then they give us the numbers and it turns out zero bracket (standard deduction + exemptions) for childless singles/couples rises by only approximately 15%. The magic number to look for on child tax credit is approximately $480. If any less, then married couples with two kids in the middle $47,000 range end up worse off.
The dotard tax plan is a riddle wrapped in an enigma. As the dotard’s top economic advisor Gary Cohn stated, there is an exception to every rule. Nothing can be guaranteed under this plan as there are unique families everywhere. The most concrete thing we know about this plan is that its effect depends upon which state you live in. The dotard is trustworthy especially when it comes to the middle and lower class so what is there to worry about?