Monday, August 28, 2017

"America First" and the single parent

Typing "Trump tax plan" into Google returns 28,000,000 (!) matches. What to believe? The "truth"? Trump to push reform? Trump to leave reform to Congress? Do we have any idea how the proposals being float affect wage-earning Americans? We should probably start with what we should expect from the IRS for what we earn this year.

Anticipated 2017 taxes

2017 IRS Tax Rate Schedule
Tax RateSingle FilersMarried and Filing Jointly or Qualifying Widow(er)Married and Filing SeparatelyHead of Household
10%$0 - $9,325$0 - $18,650$0 - $9,325$0 - $13,350
15%$9,326 - $37,950$18,651 - $75,900$9,326 - $37,950$13,351 - $50,800
25%$37,951 - $91,900$75,901 - $153,100$37,951 - $76,550$50,801 - $131,200
28%$91,901 - $191,650$153,101 - $233,350$76,551 - $116,675$131,201 - $212,500
33%$191,651 - $416,700$233,351 - $416,700$116,676 - $208,350$212,501 - $416,700
35%$416,701 - $418,400$416,701 - $470,700$208,351 - $235,350$416,701 - $444,550
39.60%$418,401 and above$470,701 and above$235,351 and above$444,551 and above
Standard deduction, personal exemption
Filing Status20162017
Single$6,300$6,350
Married filing separately$6,300$6,350
Head of household (single or married)$9,300$9,350
Married filing jointly$12,600$12,700
Personal exemption per person$4,050$4,050

Impact of income tax changes

The latest official statement issued by the White House commits "to fixing America’s broken tax code," to "make taxes simpler, fairer, and lower for hard-working American families," and to provide for "unprecedented" capital write-offs by business as well as lower corporate taxes. In short, to reduce tax rates "as much as possible" across the board.[1]

Going back to policy proposed during the presidential campaign[2]:

The Trump Plan will revise and update both the individual and corporate tax codes:

Individual Income Tax

Tax rates

The Trump Plan will collapse the current seven tax brackets to three brackets. The rates and breakpoints are as shown below. Low-income Americans will have an effective income tax rate of 0. The tax brackets are similar to those in the House GOP tax blueprint.

Brackets & Rates for Married-Joint filers:
Less than $75,000: 12%
More than $75,000 but less than $225,000: 25%
More than $225,000: 33%
*Brackets for single filers are ½ of these amounts

The Trump Plan will retain the existing capital gains rate structure (maximum rate of 20 percent) with tax brackets shown above. Carried interest will be taxed as ordinary income.

The 3.8 percent Obamacare tax on investment income will be repealed, as will the alternative minimum tax.

Deductions

The Trump Plan will increase the standard deduction for joint filers to $30,000, from $12,600, and the standard deduction for single filers will be $15,000. The personal exemptions will be eliminated as will the head-of-household filing status.

These changes promote married over single-parent families, and smaller families in general:

benefit lowest-income Americans the most by significantly raising the standard deduction, particularly for those who don't qualify for itemized deductions — the standard deduction is raised substantially, $15,000 filing singly, $30,000 jointly
eliminate the "marriage penalty", benefiting childless couples the most
penalize larger families by eliminating personal exemptions
doubly penalize single parents by also eliminating head of household filing status

Good-bye "marriage penalty",
hello "single parent penalty"

"Simpler, fairer, and lower for hard-working American families" should mean lower taxes for everyone. And we can agree, including from our own family histories, that there is no one more hard-working than a single parent. There is no greater responsibility or pressure than being the sole provider for a child. Yet these, the hardest working of us all, are taxed more heavily under the Trump plan. Comparing after-tax income under the Trump plan versus current "head of household" with the standard deduction and appropriate personal exemptions[3]:

Single-parent head-of-household gains or losses under the Trump tax plan based on gross income levels

Unless you're a single parent earning $52,500 a year with only one child — taking home $90 more a year, you lose under the Trump tax plan.

Looking deeper into those who would suffer under the proposed tax plan, not only does it radically disfavor single parents, but in doing so disproportionally negatively impacts minorities[4]:

Single parent households by race/ethnicity
Race or ethnicityTotal Single Parent Households% of Households
Black or African American6,333,00066%
American Indian333,00052%
Hispanic or Latino7,180,00042%
Non-Hispanic White8,998,00025%
Asian and Pacific Islander568,00016%

If we look at the group most affected, black or African American, where that data is available by state (27 plus Puerto Rico and the District of Columbia)[5]:

States ranked by number of black and African American single parent households
Rank State Number Percent % from Total of
1 Florida 504,000 63% 800,000
2 Georgia 499,000 63% 792,000
3 Texas 493,000 61% 808,000
4 New York 451,000 67% 673,000
5 North Carolina 323,000 65% 497,000
6 Illinois 310,000 73% 425,000
7 California 292,000 64% 456,000
8 Louisiana 273,000 72% 379,000
9 Ohio 252,000 72% 350,000
10 Michigan 241,000 74% 326,000
States ranked by percent of black and African American single parent households
Rank State Number Percent % from Total of
1 District of Columbia 49,000 80% 61,000
2 Wisconsin 77,000 76% 101,000
3 Arkansas 85,000 75% 113,000
4 Michigan 241,000 74% 326,000
5 Pennsylvania 240,000 74% 324,000
6 Illinois 310,000 73% 425,000
7 Missouri 126,000 73% 173,000
8 Louisiana 273,000 72% 379,000
9 Ohio 252,000 72% 350,000
10 Mississippi 204,000 71% 287,000

Every dollar counts when you are a single parent raising your child. But Trump's tax plan takes away more hard-earned dollars from single parents than our current tax structure — and hurts minorities the most in doing so.


[1]Joint Statement on Tax Reform, White House. LINK
[2]"Tax Plan (saved at archive.org)", Trump campaign. LINK
[3]Our analysis.
[4],[5]Our analysis of the raw data set at Children in single-parent families by race, Kids Count Data Center. LINK
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