By Stephanie Hoffer, @profhoffer
The President’s one-page tax plan, released on Wednesday, claims that it will “[p]rovide relief to American families – especially middle income families.” Whether tax reform eventually lives up to the President’s claim, though, will depend on how he and the Congress choose to address not only tax rates and the standard deduction, but also the personal exemption and credits related to children and dependents.
Like the Republican blueprint for tax reform, the President’s plan would double the standard deduction while trimming itemized deductions. It also would expand the credit for child and dependent care, although the plan doesn’t specify how.
Notably, the Republican proposal would eliminate personal exemptions provided by § 151, which allow a deduction of $4,050 per dependent in 2017. Dependents include a taxpayer’s spouse, children, and other members of the household who rely family support. Although the repeal of § 151 was not specifically mentioned in the President’s proposal, the President and Congress must reach consensus on how to reduce the cost of tax reform. Eliminating personal exemptions in favor of an expanded standard deduction may be an approach on which both could agree, but it may not be good policy. Continue reading “How Will Trump’s Tax Plan Affect Middle-Income Families?”