Wow, the “Trump Tax Plan” is now law. I’m not huge political guy but I’ve been following this legislation because of the potential “tax relief” it could provided. It seems that most of us will be getting a tax break in 2018. I’m definitely not a tax guru, but on the surface, it appears most Americans will be receiving between a 2% and 4% reduction in taxes depending on their tax bracket, where they live, etc. This essentially equates to a pay raise in 2018. While the new tax rates will expire in 2025, I’m cautiously optimistic about the plan, but it seems that there isn’t much excitement surrounding the tax breaks.
Tax Break Public Opinion
Monmouth University Poll reports that nearly half of Americans disapprove of the “Trump Tax Plan”. In another poll conducted by MSNBC, only 26% of Americans approve of the plan. Support for this plan seems quite low, mostly because people perceive this reform as primarily benefiting the rich or think taxes will increase. In addition, Trump is not a polarizing politician. I can appreciate people being suspicious of anything coming out of Washington. Heck, I think the last law that promised to impact most of our pocket books positively was the healthcare law. I’ve only seen my insurance rates increase significantly over the years since it was passed. Yet, I would argue that this plan will touch most of us in a positive manner.
The tax bracket breakout as reported by Business Insider is as follows:
Doing some quick math, for a married couple earning $50,000 / year, their savings from 2017 to 2018 should be around %3. This would yield a tax savings of around $1,500 per year or around a $56 savings per paycheck, assuming 26 pay periods. Projecting savings until 2025 (approximately 8 years) and assuming everything stays the same, the couple would have saved $12,000. Assuming the couple invested this money in an index fund, earning 7% yearly, they money would have grown to about $15,400. I don’t know about you, but I’m all for anything that puts money in my pocket and allows me to dictate how it is spent.
Tax Break Calculator
Of course there are other factors that impact each individual case such as itemizing, the state you live in, property taxes, kids, etc. Fortunately, you can get a good estimate by using the Tax Plan Calculator developed by Maxim Lott. It’ll show you your projected tax saving with the Final Bill that passed Congress, as well as the tax savings in the Old Senate and House bills, just for shits and giggles. It also takes into account the factors mentioned previously. Pretty nifty. Simply enter your specific information and voila, your tax savings (or tax increases) will be calculated. My projected savings for next year will be around $4k.
Of course I share the skepticism of most Americans, but I remain optimistic. As with most anything passed in Washington, the proof is in the pudding, but I’m open to thinking that this will benefit most people, at least until 2025 (when it expires). If you’re lucky enough to receive a tax break with the new tax plan, have a plan and be ready to execute! I will definitely be updating this post once I receive my first 2018 pay stub.