For all of you believing that a Biden/Harris Presidency would only raise taxes for those making over $400,000, it isn’t true. Their plan includes immediately ending the Tax Cuts & Jobs Act of 2017, Kamela states this explicitly in this video: https://www.youtube.com/watch?v=FQf1vroSsd4
The Tax Cuts & Jobs Act among other things, raised the standard deduction meaning that everyone, across the board on income levels, had TWICE as much income that was not touched by federal income tax. For example, in 2017 the standard deduction for a single person was $6,350. After the act, in 2018 it was $12,000 – almost doubled! So that was an extra $5,650 untouched by federal income tax. In addition, the tax rates across the board were lowered and the individual mandate was removed.
As a tax preparer who worked through the individual mandate, I would have a couple low income individuals every year literally in tears as they made a payment plan for the penalty that they owed for not buying health insurance they could not afford. It was the worst insult to injury on those who could not pay for health insurance to then pay a penalty for not being able to pay for health insurance.
I could go into all the details all day long on the increases that will come with repealing this Act and the trickle down that will occur corporately as their rates increase again but I want to target simply the biggest changes that affect the lowest income families and these are: the standard deduction increase, the child tax credit increase, and the repeal of the individual mandate. I ran a test through my software of a single person making $15,300 without health insurance in 2017 before the Act and again in 2018 and 2019.
In 2017 a single individual making $15,300 would have paid tax of $1,188 including the individual mandate. In 2018 after the Tax Cuts & Jobs Act the same person would have paid tax of $1,028. The tax was reduced due to the increased standard deduction and lowered rates in 2018 but the individual mandate did not fully drop off until 2019. In 2019 this same person would have paid $313.
So taxes under Obama/Biden for a low income individual were almost 4 TIMES AS HIGH as what they were when the Tax Cuts for Trump administration came into effect fully.
If you are in a lower income bracket, don’t listen to what you hear from the politicians, it WILL affect you. Start saving… if Trump loses the litigation and the Tax Cuts Act of 2017 is repealed; it will affect you. Even if you make less than $400,000.
The Biden team have discussed increasing some child tax credits, etc but my opinion on reading through these changes is that there are still individuals these will not affect (like those without children). Even if the net affect of the changes that have been discussed after ending the 2017 Tax Cuts ends up reducing taxes for the low income, it may not take effect immediately and it has not been finalized enough to know for sure.
Either way, it’s a good idea to tuck some savings away just in case.
Written by Laura Fleig
www.fleigfinancialsllc.com
November 11, 2020
