(WJBK) - Lawmakers passed sweeping tax overhaul that impacts every single American on Wednesday. Overjoyed, Republicans are promising big cuts to the rich will trickle down, while Democrats say the new tax plan cheats the middle class.
The fact is the tax plan will become law, so FOX 2 is asking a local CPA for an unbiased breakdown of how the overhaul will impact your money.
The president got his wish and so did fellow Republicans in the Senate and House who support this GOP tax plan. Proponents of this bill aren't shy in saying the reason for the bill is to cut corporate tax rates, going from 35 percent to 21 percent.
Certified public accountant Brian Weeland says Republicans want the cut to corporate taxes so that:
"They can build the economy with jobs. Don't think politically it would have flown all by itself, so they put in the other, what they call reforms," he said.
Reforms that the nonpartisan Tax Policy Center says look like this:
- $25,000 or less: average tax cut of $60 on your annual tax return
- $49,000 and $86,000: cut of about $900
- $308,000 and $733,000: cut of $13,500
The president essentially says one measure in the tax bill all but wipes away Obamacare by eliminating the mandate to buy health insurance.
"It takes away the mandate for people to buy health insurance. So there will be people that choose not to pay for their share of the coverage because they don't need it," Weeland said.
The standard deduction also doubles to $24,000. With the corporate tax rate being slashed, Republicans predict that it will create jobs and keep companies from doing business overseas. The largest breaks will go to the wealthy. The tax breaks expire in 2025, at which time the middle class will pay more.
"A lot of people are not going to be able to get itemized deductions for their charitable contributions if they're not getting up to the $24,000 level. And I think it will affect most people’s decision on how much to give. People are still going to give who want to but they could afford to give more when Uncle Sam is subsidizing a part of it," Weeland said.
The tax child credit increases to $2,000 for every child, and small businesses will see a tax reduction rate of 20 percent.
"Small businesses in general will have less taxable income and they'll pay less tax on it. So that 20 percent deduction will be fantastic for small businesses," he said.
CPAs will tell you this bill will affect everyone differently. It's not one size fits all. It all depends on how much you itemize.
"Depending on how much their itemizing, some people will have a lower taxable income and some people will have a higher taxable income," Weeland said.