Donald Trump’s election win signals changes in tax policies that could shape the financial future for middle-class Americans.
While President-elect Trump promised to lower taxes for most Americans by extending or making permanent the 2017 Tax Cuts and Jobs Act (TCJA), the broader impact of his tax proposals remains to be seen once he officially takes office next monyh.
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Will middle-class families see lasting benefits, or will Trump’s stance on trade and other factors offset the gains? Here is how his tax plan could affect the middle class.
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Throughout this year’s campaign, President-elect Trump vowed to continue or to make permanent the TCJA. The law, which is set to expire next year, changed the federal tax code in several ways that affect the middle class.
“President-elect Trump’s tax plan is designed to provide much-needed relief by addressing the soaring costs of inflation,” said Andrew Loposser, president of APL Consulting, a Virginia-based Republican consulting firm. “The plan will achieve this in two ways: encouraging businesses to hire more workers and ensuring no tax increases for families whose budgets have already been stretched for years.”
For example, the law lowered the 15% tax rate to 12%, nearly doubled the standard deductions, simplified the filing process for many taxpayers, and potentially reduced taxable income for middle-class households.
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Paul Carlson, a CPA and managing partner at Law Firm Velocity, said while maintaining or making the 2017 tax cuts permanent will help middle-class families with everyday expenses, President-elect Trump’s tax proposals also have negative effects.
“The downside is that making these cuts permanent could lead to budget shortfalls in social programs, which many middle-class families rely on, like education and healthcare,” Carlson said.
In addition, Carlson said if Trump lowers the Child Tax Credit from its current level of $2,000, families will feel the pinch, especially those with multiple children.
“Right now, you really want to boost your emergency savings,” Carlson said. “If taxes go up or credits get cut, you’ll need that cushion.”
Another key factor among the 2017 tax law changes enacted during Trump’s first term was the provision that brought the U.S. corporate income tax rates in line with those levied in Europe and Asia.
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