I know. The “tax reform” plan just announced by the House leadership is only a starting point. However, I am not a trusting soul, so I decided to run a few numbers myself. I wanted to see what the impact would be on us. I also know that reasonable people do argue about who is considered “middle class.” Most of the numbers that I have seen would include us in that group, although, perhaps, at the high end. We certainly are not rich according to any reasonable calculation.
My method was simple. I began with our 2016 Adjusted Gross Income. I then added in the exemptions and deductions that would no longer be permitted under the current proposal to achieve a new AGI. I then applied the reported tax rates — 12% for the first $74,400, and 25% for the balance. The result was a 47.3% increase in our tax bill. Our new “effective rate” would be 20.5% compare to the 2016 rate of 14.6%. We are clearly not part of any “middle class tax cut.” The President’s top economic advisor, Gary Cohn, is quoted as saying that “…everyone has got their own unique set of circumstances.” Therefore, it seems somewhere between disingenuous and dishonest to make sweeping claims about tax reductions for ill-defined economic groups.
Those that know me, know that I do not object to tax increases that pay for the goods and services we receive from government. I also am a believer in progressive taxation. I certainly hope that true “working class” Americans enjoy tax relief. I do remain suspicious. It appears that the tax relief is disproportionately slanted to wealthy individuals and corporations. It is entirely possible, then, that our tax increase is being used to pay for their tax decrease rather than for improved government services. The promise of “pie in the sky by and by” based upon unproven economic theories is insufficient consolation, the assurances of the current Council of Economic Advisers to the contrary notwithstanding.
I recommend that everyone do the numbers for themselves. Simply accepting glib assurances is dangerous. Even Mr. Cohn is recommending the same thing. Perhaps we might ask our Senators and Congressmen to run their numbers and to compare them with ours. I might be more charitable toward our Congressman if his taxes also increased 47.3%.