The 2016 income tax filing deadline is now just two days away, and American taxpayers may be getting their last look at the Obama-era income tax brackets. Following a disastrous failure on healthcare reform, President Donald Trump and Congressional Republicans have pledged to move forward with campaign promises of tax reform.
House Republicans are still ironing out details of how they intend to pay for aggressive tax cuts. U.S. Rep. Kevin Brady (R–TX) has suggested a border adjustment tax on imports could generate $1 trillion in funding over the next decade, but American retailers have argued the import tax would result in higher prices and fewer American jobs.
While an official proposal is likely still weeks away, previous proposals from both the president and the House could shed some light on what American taxpayers can expect a year from now.
Both the president and Congressional Republicans want to reduce the number of income tax brackets from seven to three and cut taxes across the board for all Americans. Here’s a look at the tax brackets for 2016 filers:
Both Trump and the House are aiming to reduce the number of income tax brackets to three and reduce the top marginal rate for the highest-earning Americans from 39.6 percent to 33 percent:
While both plans would reduce taxes across the board, the NPR graphic below indicates just how much both plans would disproportionately favor the top 20 percent of American earners.
The top 1 percent of individual earners, who earn more than $288,000 per year, would see roughly a 13.5 percent increase in post-tax income under both plans. The bottom 20 percent of earners, who earn less than $17,000 per year, would see only a 0.4–0.8 percent increase in post-tax income.
For now, Americans should take the proposed brackets above with a grain of salt, especially after health care negotiations between the White House and Congress broke down. The previous tax reform proposals do shed some light on where both sides will be coming from when it comes time to vote on the issue.
Investors are hoping that individual and corporate tax cuts will provide major stimulus to the economy. The SPDR S&P 500 ETF Trust (NYSE: SPY) was recently seen up 9.5 percent since Election Day.
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