Americans for Tax Reform Foundation today released a study titled “Who Benefits From Simplification Proposed in the Republican Tax Reform Framework?”
The study includes recently released IRS state by state data on the Alternative Minimum Tax (AMT), the Child Tax Credit, and the Standard Deduction.
President Donald Trump and Congressional Republicans had four goals in mind when developing this framework: 1. Simplify the tax code; 2. Give American families more take-home pay; 3. Create more jobs; and 4. Bring home trillions of dollars, which are currently overseas.
The study examines the several ways the framework achieves its simplification goal.
Doubling the Standard Deduction
The plan doubles the standard deduction to $12,000 for an individual and $24,000 for a family. This increased deduction simplifies the tax code by encouraging more taxpayers to take the standard deduction, rather than itemizing their deductions, a complex and time-consuming process. In addition, the larger standard deduction reduces the tax burden of many Americans, including all those currently in the 10% bracket to zero.
The number of people this plan will help is large. In Texas, today, over 9 million taxpayers take the standard deduction. In Florida, more than 7 million taxpayers take this deduction, and more than 3 million Americans in North Carolina and Michigan also take it.
Increasing the Child Tax Credit
The framework also raises the current child tax credit amount of $1,000 per child and folds other deductions into it. While the framework does not specify the level of increase, Senator Marco Rubio and special advisor to the President Ivanka Trump have suggested increasing the cap to $2,500 per child.
According to IRS data, this part of the framework would help more than 22 million Americans who take the child tax credit. In California, alone, almost 3 million taxpayers take the credit, while over a million people in Florida and New York also use it. Finally, over 2 million Texans also take the credit.
Repealing the AMT
The framework repeals the Alternative Minimum Tax (AMT). This repeal simplifies the tax code significantly. Many Americans today are forced to calculate their taxes twice if their income is higher than the AMT threshold. They then pay the higher amount of either the AMT or the normal tax burden. This is expensive and time consuming.
Further, the AMT was only initially passed to make sure 155 high-income Americans paid some federal income tax. Today, almost 4.5 million Americans have to pay the tax. For example, in California, more than 900,000 taxpayers pay the AMT, and more than 500,000 pay it in New York. In Texas, almost 250,000 taxpayers pay this tax, while 166,000 pay it in Pennsylvania.
This study, therefore, finds that many Americans are helped when the standard deduction is doubled, the child tax credit is increased, and the AMT is repealed.
To find out more on who is helped by the framework in your state, please click here.