President Trump’s Fiscal Year 2021 budget calls for further tax relief for American families through the extension of the individual Trump tax cuts.
Thanks to the Trump tax cuts, a family of four earning the median income of $73,000 is seeing a reduction of federal income taxes of $2,000 – a 60 percent cut. Similarly, a single parent with one child making the median income of $41,000 is seeing a $1,300 tax cut, a 73 percent reduction in federal income taxes.
However, because of arcane Senate procedure and the refusal of Democrats to support the tax cuts, the individual tax reductions could only be enacted for 8 years – through 2025.
Many Democrats in Congress and on the campaign trail have proposed repealing these tax cuts. This would be a significant tax increase for American families.
According to the Heritage Foundation, the average American would be almost $27,000 poorer over the next ten years if the tax cuts were repealed. The average family of four would be almost $46,000 poorer.
The Trump budget will make the Trump tax cuts permanent, extending numerous provisions including:
- The doubling of the standard deduction from $6,000 to $12,000 for an individual and $12,000 to $24,000 for a family. Thanks to this reform, 90 percent of taxpayers are now taking the standard deduction, dramatically simplifying tax compliance as fewer individuals are itemizing.
- The reduction of nearly every individual income tax bracket.
- The doubling of the child tax credit from $1,000 to $2,000. The CTC is claimed by roughly 22 million American families.
- The 20% small business deduction for pass-through businesses (LLCs, partnerships, S-corporations etc.). There are over 26 million pass-through entities in the U.S.
- The doubling of the death tax exemption from $5.5 million to $11 million. This reform reduced the number of estates owing the death tax from 5,500 to 1,700.
- An expansion of the thresholds at which the Alternative Minimum Tax hits individuals. Because of this tax cut, the AMT now kicks in when a taxpayer makes annual income of $1 million. The number of families paying the AMT has dropped from 5 million to 200,000.