The head of a tax policy foundation, Scott Hodge, believes the proposed plan is “viable”, although the plan is lacking some details. The Tax Foundation is an independent, non-partisan tax policy research organization which was founded in 1937.
Hodge stated in an interview with CNBC, “I think it’s a real step in the right direction, Not only in just simplifying the tax system, but in creating a more dynamic tax system, one that is more conducive to economic growth.”
This newly revamped tax plan brings a simpler tax code for individual tax payers from seven income brackets down to three brackets: 35 percent, 25 percent, and 12 percent. This is another “bracket” for those who do not pay income tax at zero percent. The standard deduction will double to $12,000 for single taxpayers and $24,000 for married couples that file together.
Hodge believes that will prove extremely beneficial for those in the zero bracket. He stated, “At the bottom end, they’re going to make some big changes. They’re increasing the standard deduction, the ‘zero bracket’ if you will, so that a couple won’t pay any income taxes up to $24,000 a year. That’s great.”
Trump’s plan also suggests removal of nearly all itemized deductions, except for mortgage interest and for charitable donation deductions. “That’s the real balance here, is how far we can reduce tax rates to make up for some of the deductions that we’re going to lose,” Hodge stated.
Another key term of the tax reform is the removal of deductions for state and local taxes. This provision could pain the middle and upper-income tax payers.
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Hodge predicts, “It’s possible that some people who earn between $100,000 and $250,000 a year may be slightly worse off. Because remember, they’re paying very high property taxes, very high state taxes and so it’s possible that even by reducing tax rates, they may end up paying a slight increase in taxes.”
Taken as a whole the plan is anticipated to reduce most tax bills.