DENVER -- President-elect Donald Trump’s tax plan will reduce taxes by thousands of dollars for millions of Americans, but could require fewer people to pay more taxes, according to a review of the plan by the Tax Policy Center and a University of Denver finance professor.
“Trump plans to reduce the tax rates for both corporations and for most individuals,” said Mac Clouse, a finance professor at the University of Denver. “There’s an expectation that there will be tax cuts for the majority of people.”
The plan must be approved by Congress and it is unclear what other factors such as changes to allowed tax deductions could affect a family’s tax bill.
Middle-class Americans can expect to save under the plan, but some households will pay more.
Melissa and Brian Smith, from Arapahoe County, are raising three young children and have followed the president-elect’s comments on taxes carefully.
“Who doesn’t want more money? We do,” Melissa Smith said. “Sometimes our kids may want to do four or five sports at a time and we’ve had to say, ‘We’re at two to three max,’ because we just can’t afford it,” Brian Smith said.
HOW MUCH FAMILIES COULD SAVE
Clouse's analysis considers numbers from the Tax Policy Center and shows a married couple without children making $50,000 will save $577 a year, or about nine percent.
Married couples without children who make $100,000 stand to save $1,338 or about eight percent, Clouse said.
The savings grow to $4,647 for couples making $200,000. That’s a savings of about ten percent, for married couples without kids.
Those couples earning $1 million a year stand to save 12 percent or about $41,511.40.
Couples considered part of the “one percent” could save 13.5 percent, Clouse says.
SOME COULD PAY MORE
Married couples without children making between $30,000 and $39,000 will pay two percent more, Clouse said. The Tax Policy Center’s analysis shows many single-parent households and some married couples with three or more children will pay more, too.
President-elect Trump has said that he will help those families by offering tax-free child care savings accounts.
DEBATE OVER PLAN
“One of the biggest negatives of the plan,” Clouse said, “is that it could have a huge impact on our national debt.”
Clouse said economists say the national debt could go up by as much as $9.5 trillion over ten years. As of Wednesday, the national debt stood at more than $19.9 trillion.
University of Colorado Denver professor Eric Zinn, who is the director of the Graduate Tax Program, cautions people from relying on specific numbers.
“The proposed policy of Trump’s administration is unclear,” Zinn told Denver7 this week.
He points to recent comments by President-elect Trump’s nominee for Treasury Secretary, Steven Mnuchin.
"Any reductions we have in upper-income taxes will be offset by less deductions, so there will be no absolute tax cut for the upper class. There will be a big tax cut for the middle class, but any tax cuts we have for the upper class will be offset by less deductions that pay for it," CNN quotes Mnuchin as saying in an interview with CNBC.
That comment appears to conflict what President-elect Trump has proposed.
A recent Forbes.com headline said, “Trump’s treasury pick describes a very different plan than his boss campaigned on.”
The article said the tax plan Mnuchin talked about on CNBC on Nov. 30 “bears little resemblance to any of the multiple plans that Trump proposed during the campaign.”
Zinn said taxpayers should take advantage of deductions available to them in 2016 because President-elect Trump has said he will do away with many deductions in the future.
“Given the current flux of Trump’s tax plan… it makes sense for most taxpayers in 2016 to accelerate deductions into 2016, if they can, and postpone income recognition into 2017,” Zinn said.
He said an example would be making as many charity donations as possible in 2016 and delaying income, when possible, until 2017.