The voices of Tax Policy Center's researchers and staff
The House and Senate versions of the Tax Cuts and Jobs Act would change the tax bills of households in very different ways. To show how, the Tax Policy Center has created several example households for both 2018 and 2027.
Take a couple with income of $250,000 that has no children and itemizes deductions. Both the House and Senate bills would cut taxes for most households. However, those tax cuts are designed differently. One example: The way they’d treat owners of pass-through businesses, such as partnerships and sole proprietorships. The House bill would cut taxes for the couple by roughly $2,100 whether their income was from salaries or from a pass-through business. However, under the Senate bill, these wage earners would pay $730 more in taxes in 2018 while the same couple would pay $11,500 less in taxes if they owned their own business.
Similarly, TPC looked how where you live could affect your federal income tax bill. Take a married couple with a combined salary of $135,000 that itemizes deductions. If they live in a high-tax state, they’d get a 2018 tax cut of about $150 under the House bill but pay almost $800 more under the Senate bill. However, if they live in a low-tax state, they’d get a tax cut of about $1,500 under the House bill and about $600 under the Senate bill.
By 2027, after many individual income tax changes would have expired, the couple living in the high-tax state would pay about $1,200 more under the House bill and about $300 more under the Senate bill. If they lived in a low-tax state, they’d pay about $550 less under the House bill but about $300 more under the Senate bill.
TPC’s examples also include higher-income households, low-income families, singles, and graduate students. The differences among taxpayers can be large, depending on where they live, how they make their money, and the makeup of their families.
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