Will the Trump tax plan really “work for all American taxpayers”? In particular, will it work for taxpaying Americans, in the Bay Area? Answer: No, I don’t think so, and here are just a couple of reasons why.
On April 26, President Trump released his tax reform proposal for 2017; it encompasses both individual and business tax changes. If it passes the Senate as it is currently written, it will be one of the biggest tax cuts in American history.
This one-page proposal of President Trump provides Congress with an outline, for tax reform in 2017. The Trump administration claims that the proposed tax reform “works for all American taxpayers”. However, in truth, it is primarily only very wealthy people, that will benefit from this tax reform. In reality, many working or middle class taxpayers will be paying more in taxes, than they would under the current tax codes.
Here is an example: in California, especially in the Bay Area, home-owners pay significant property taxes and accordingly, they get a significant deduction, on their tax return. However, the new tax reform would “limit itemized deductions, to only mortgage interest and charitable donations”. Thus, Bay Area taxpayers would lose their property tax deduction on their return, which could wind up costing them thousands of dollars a year.
Here is another example, people with a large medical bills, would lose their tax deduction benefits for medical expenses. A nice local couple, one spouse works as a nurse and the other works for our local government. Both are typical W-2 wage earners, they own their house and a rental property in Bay Area. On their 2016 tax return, it shows their Adjusted Gross Income (AGI) is in the amount of $192K.
Unfortunately, since one of them became very ill last year, they incurred $35K, in out-of-pocket medical expenses. Under the current tax code these expenses generate a significant itemized deduction, resulting in a taxable income of: $121K with a tax liability of $21K. The couple are happy to receive a federal tax refund of $10K.
However, if you took the same tax information and used the currently proposed tax treatment of “double the standard deduction” which would be merely $25,200, our Bay Area couple would only get a tax refund of $500. Compared to the current tax code that is giving them $10k their taxable liability would be increased by 2000%!
On May 17, I will go to Capitol Hill to attend meetings, arranged by the US Congress and National Association of Enrolled Agents. We will meet House Representatives and members of the Ways and Means Committee, to discuss tax reform and other tax issues. It is an opportunity for the tax law makers to learn about the concerns of taxpayers and hear the voices of their voters. I have many concerns about this proposed tax plan, which is supposed to “work for all American taxpayers”, the main one being that; it will only work for the wealthiest of Americans and not for a vast majority of Californian taxpayers.
As an Enrolled Agent, I am the taxpayer’s representative and advocate, I want to bring your voice, to our local congressional representatives and the Federal Ways and Means Committee, when I go the Washington DC. If you have any concerns and/or questions, on the Trump administration’s tax reform proposal, I would like to hear about them.
Please contact me at: [email protected], www.unicomtax.com or Unicom Tax Services, 755 Broadway, Sonoma, CA 95476. I look forward to hearing from you!
Jack Ding, E.A., Sonoma