- Many employees are taking home more money in their paychecks this year due to the new tax law.
- The long-term average increase in income after tax is estimated to be 1.5 percent.
- Federal tax revenue is estimated to decline $576 billion over the next 10 years, increasing the deficit.
The 2017 Tax Cuts and Jobs Act made significant changes to the tax code that take effect this year, which taxpayers will see when they file their 2018 tax returns early next year. Many workers saw increases in their take-home pay earlier this year as new withholding tables took effect.
The Tax Cuts and Jobs Act was touted as a tax break for the middle class, and also includes a large cut in the corporate tax rate. But that money has to come from somewhere, so the federal government will lose tax revenue as a result of the cuts.
Learn How: Find Out If You’re in the Middle Class
How Much Federal Revenue Will Be Lost
Over the next 10 years, assuming that the tax cuts stay in effect, the loss of revenue would total $638 billion. The anticipated economic growth due to the tax cuts would add $62.1 billion, resulting in a net revenue reduction of $575.9 billion.
The changes to individual income tax rules will be in effect until Dec. 31, 2025, unless they are made permanent before that time. The House of Representatives has already approved a measure to make them permanent, but the Senate has not yet approved it.
If the cuts stay in effect, they will reduce federal revenue by $112 billion a year (after accounting for the economic growth spurred by the cuts), according to the Tax Foundation, which also estimates the provisions would increase long-run GDP by 2.2 percent, increase wages by 0.9 percent, and add 1.5 million full-time jobs.
How Taxpayers Will Be Affected
The Tax Foundation estimates that the impact of making the individual provisions in the 2017 Tax Cuts and Jobs Act permanent to be an increase in after-tax income — aka take-home pay — of approximately 1.5 percent. The increase is fairly level across income groups, except for taxpayers in the 95th percentile of income earners and above, who will see their after-tax income increase by 2.4 percent.
Read about more ways Trump’s tax cuts could affect you.
More on Taxes
- These 15 Countries Pay More in Taxes Than Americans
- How Much Money You Would Have If You Never Paid Taxes
- Are Social Security Benefits Taxable?
- Watch: Critical Things to Know About Your Paycheck
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This article originally appeared on GOBankingRates.com: To Boost Your Income Less Than 2%, Trump Just Increased the Deficit by Billions