Proponents of the new tax plan have made a lot of noise about simplifying the tax code for working Americans by reducing the number of tax brackets. The Trump-McConnell-Ryan tax plan calls for individual income tax rates of 12, 25, and 35 percent.
Depending upon where the rates kick in, there may or may not be any benefit for those who currently fall in the 25 percent tax bracket or lower. In fact, some low- and middle-income people may pay more tax than under current law, since other “simplifying” proposals include eliminating personal and dependent exemptions, the additional standard deduction for seniors and the blind, the deduction for high medical expenses, and the state and local tax deduction. Altogether, the Trump-McConnell-Ryan tax plan will cost middle class taxpayers an increase in taxes of $470 billion over 10 years.
Millionaires, on the other hand, would benefit in two ways from the collapse in rates. The top rate, which currently applies to all income above roughly $400,000, would be cut from 39.6 down to 35 percent. For someone with $1 million in taxable income, this could be a tax cut of $26,000. They would also get a secondary benefit from the lower rates on portions of their income that fall in the (newly reduced) lower-rate brackets.