WHAT THE FAIRtax WILL DO FOR THE MIDDLE CLASS - THE CURIOUS CASE OF ANN AND BOB SMITH
Business Insider has come out with an analysis of what is known of The Administration's Tax Reform Plan as compared to the current system. They looked at the results as they would apply to a typical middle class family.
Ann and Bob both work, and they have $120,000 a year of salary income. This income is comfortable, but it's not that far above average for a nuclear family; according to Pew, the median income in 2015 for a family where both parents work and at least one child lives at home was $102,400. Ann and Bob are not the sort of taxpayers who are ususally targeted for a tax increase –- especially as part of a tax plan that cuts taxes overall.
- Now, let's flesh out their financial situation:
- Their home is worth $420,000, or 3.5 times their income.
- They have a mortgage balance of $252,000, 60% of their home's value This year, they will pay $8,636 in interest on the mortgage.
- They pay state income taxes of $4,800 which is 4% of their income, and property taxes of $4,620, which is 1.1% of their home's value.
- They give $3,000 to charity, which is 2.5% of their income.
All of these deduction-related figures are close to the national average for a family of the type. Using the current tax code, Ann and Bob would claim four personal exemptions (two for themselves and one for each of the kids) totaling $16,200, and they would deduct their state income taxes, property taxes, mortgage interest, and charitable contributions, which total $21,056. These deductions would leave Ann and Bob with a taxable income of $82,744, yielding tax before credits of $12,163.
Then they would get a child tax credit of $1,500. This credit is normally $1000 per child, but because the credit is phased out for families who make more than $110,000, Ann and Bob get to keep only part of it.
Here are tax calculations for Ann and Bob Smith's taxes under current laws and under my estimates of tax provisions under the new Republican plan.
Now let's take a look at the same set of circumstances calculated under the FAIRtax. NOW WE ARE SHOUTING! BOTH SYSTEMS ANALYZED BY BUSINESS INSIDER DO NOT ALLOW FOR THE PAYROLL TAXES, SOCIAL SECURITY, MEDICARE, AND MEDICAID. THOSE TAXES ARE PART OF THE FAIRtax. 80% of taxpayers pay more in payroll taxes than they pay in income taxes. Adding an additional 7.65% of their $120,000 income means tax after credits would be $19,843 current system and $20,430 Trump plan. Americans For Fair Taxation has developed a calculator for figuring the projected savings from replacing the income tax with a national consumption tax.
We call it the Keep It Simple FAIRtax Calculator.
As shown by the calculator, the FAIRtax would be $16,676 (23% of $72,504 taxable spending). That's a net savings of $3167 compared to the current system and $3,754 compared to the Republican proposal.
Ann and Bob should just say NO to the present system and DON'T DO US ANY FAVORS to the proposed reform.
GIVE US THE FAIRtax INSTEAD!
Here is the link to the KIS FAIRtax Calculator.
David Boone is a retired Sears Appliance Technician (problem solver by trade). Educated in the liberal arts at Wabash College, the only all male college west of the Allegehnies, he has spent many of his waking hours since retirement fighting in the FAIRtax wars. At present he serves as the Mn. District 1 Director for the AFFT. Other duties include Co-Editor at the Facebook Official Page, primary moderator at FAIRtax 2017, End Class Warfare, and FAIRtax Wisconsin, also all on Facebook.
Dave can be reached at dboone@acegroup.cc