Yes, I'm very well aware of how our income tax works. It's not nearly as complicated as people make it out to be. In most all of comments and figures above, I was speaking in marginal
terms. Yes, it's obvious that I'm not paying a total of 25% when I'm in the 25% bracket. But if my total taxable income increases or decreases by $10,000, my tax bill most certainly is
changing by $2,500.
So, in 2016, after taking out my retirement contributions, mortgage interest, state income tax, property taxes, and personal exemption, I had $43,465 of taxable income, which means $6637.50 in federal income taxes.
I wrote off $7,516 in state income taxes and the personal exemption. With those gone, I'm at $50,981 in taxable income. (I'm still above $12k in itemized deductions, which means that the increase in standard deduction means diddly squat to me.)
So, $50,981 in taxable income under the new brackets means ($45,000 * 0.12) + ($5,981 * 0.25) = $6,895.25 that I'd owe in 2018.
I gladly admit that my original calculations were a bit off because I wasn't considering the brackets below my 25% and the effect they had on the overall total.
That said, as long as you're still keeping track, that's still $257.75 more
than I paid before.
My point still remains that middle class homeowners in states with higher income taxes and/or states with higher costs of living (i.e. higher wages) will see much larger increases to the tune of $0.25 on the dollar more in taxes they pay than I do. And with all the other deductions being eliminated (medical expenses, student loan interest, child adoption credits, etc.), there will certainly be MILLIONS of people paying more next year than this.
Oh, and regarding the capital gains on your personal residence. It IS indeed changing. Previously, capital gains were excluded if you lived in a house for 2 of the previous 5 years. It's now changing to 5 of 8 years. When I bought my house about 2.5 years ago, I had every intention of moving out 2-3 years down the road. Well, things have worked out roughly as I planned, and I'm looking to move out in roughly 6 months from now. Because of the ridiculous growth the Raleigh/Durham market has seen in the last few years, the latest estimates have my house at being worth ~$40,000 more than when I bought it, and no sign of it slowing down anytime soon. That means that I'm going to owe $6,000+ in capital gains taxes when I go to sell it next summer. Yay.
Look, you, or Paul Ryan, or Trump, or whoever, can try and spin this a thousand different ways, but here's the facts:
1. Many Americans who only take the standard deduction will see small decreases in their tax liability.
2. Virtually all of the nation's richest few percent will see dramatic tax cuts, whether in the elimination of the AMT, the estate tax, or the business tax changes.
3. Middle class itemizers will get stuck with the bill. There's almost 30 million Americans with incomes between $50k and $200k that itemize, and the majority of those will see their taxes increase. These people are the absolute backbone of the American economy, the people that actually have a little spending money leftover at the end of each month, and tend to spend it. Taxing these people is going to be extremely counter-productive for the economy.
All of this, and they're STILL adding 1.5 trillion (with a 'T') to the deficit over 10 years.
So, as I said earlier. Screw Paul Ryan and these supposed conservatives / Republicans.
---------- Post added at 04:27 PM ---------- Previous post was at 04:13 PM ----------
Here's a very good read (that was specifically prepared for members of Congress):
Here's a particular line that sticks out:
Although tax filers with an AGI greater than $1 million claimed a larger average amount of deductions ($424,864), 87% of itemizers had an AGI less than $200,000 (or 97% have less than $500,000 in AGI) and they accounted for 65% of itemized deductions claimed (or 82% for itemizers with less than $500,000 in AGI).
In other words, all of these deductions that they are eliminating are disproportionately affecting people with incomes less than $200,000 (or $500,000).
So they're helping out relatively poor people a little bit by increasing the standard deduction, helping out the rich tremendously with the elimination of several key taxes, all-the-while nailing middle class itemizers to the wall by eliminating the deductions that benefit them (the middle class) the most.
Republicans / "conservatives" are going to have to do a whole bunch of mental gymnastics to defend this one....