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What Could Your Tax Burden Be Under the Next President?

By: Kyle Pomerleau

This election season, nearly every presidential candidate has released a detailed plan on how they would change the tax code. Some of these plans are small and would have a limited impact on taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. payers and economy. Other plans are big and would drastically impact federal revenues, the economy, and taxpayers. Using our Taxes and Growth (TAG) macroeconomic model, we analyzed how these plans would impact the economy, federal revenue, and the distribution of taxes paid.

While analyses like those are very important, these plan are complex and have a lot of moving parts. For many people, it is hard to understand how these plans will impact them. That is why we partnered with USA Today to build a simple tax calculator. This calculator allows you to enter your and your spouse’s income and the number of children you have. The calculator then tells you roughly what your tax bill is under current law and what it would be if Hillary Clinton, Ted Cruz, Bernie Sanders, and Donald Trump were able to enact their tax plan.

How does this calculator work?

The calculator takes you and your spouse’s income (if you are married) and the number of children you have. From there, it does a simple calculation to show, roughly, how much tax you owe under current law and how much more (or less) you would owe under each candidate’s tax plan. The calculator assumes that your income is all wage income and that you take the standard deductionThe standard deduction reduces a taxpayer’s taxable income by a set amount determined by the government. It was nearly doubled for all classes of filers by the 2017 Tax Cuts and Jobs Act as an incentive for taxpayers not to itemize deductions when filing their federal income taxes. . While this leaves out many details about how candidates will change itemized deductionItemized deductions allow individuals to subtract designated expenses from their taxable income and can be claimed in lieu of the standard deduction. Itemized deductions include those for state and local taxes, charitable contributions, and mortgage interest. An estimated 13.7 percent of filers itemized in 2019, most being high-income taxpayers. s and the treatment of capital gains, it does give a good idea of how these plans will impact a vast majority of people.

The calculator accounts for several provisions in the current tax code and several that would be introduced under each candidate’s plan. For current law, it accounts for the individual income taxAn individual income tax (or personal income tax) is levied on the wages, salaries, investments, or other forms of income an individual or household earns. The U.S. imposes a progressive income tax where rates increase with income. The Federal Income Tax was established in 1913 with the ratification of the 16th Amendment. Though barely 100 years old, individual income taxes are the largest source of tax revenue in the U.S. , the employer- and employee-side payroll taxA payroll tax is a tax paid on the wages and salaries of employees to finance social insurance programs like Social Security, Medicare, and unemployment insurance. Payroll taxes are social insurance taxes that comprise 24.8 percent of combined federal, state, and local government revenue, the second largest source of that combined tax revenue. es, the Medicare surtaxA surtax is an additional tax levied on top of an already existing business or individual tax and can have a flat or progressive rate structure. Surtaxes are typically enacted to fund a specific program or initiative, whereas revenue from broader-based taxes, like the individual income tax, typically cover a multitude of programs and services. , the Child Tax CreditA tax credit is a provision that reduces a taxpayer’s final tax bill, dollar-for-dollar. A tax credit differs from deductions and exemptions, which reduce taxable income, rather than the taxpayer’s tax bill directly. , the Earned Income Tax Credit, the Alternative Minimum Tax, and the personal exemption phase-out. The calculator accounts for the new value-added tax proposed by Ted Cruz, the Buffett Rule and 4 percent surtax proposed by Hillary Clinton, and the new payroll taxes proposed by Bernie Sanders.

Where is John Kasich?

John Kasich is missing because the specific details of his plan are missing. He has yet to propose new tax rates and tax bracketA tax bracket is the range of incomes taxed at given rates, which typically differ depending on filing status. In a progressive individual or corporate income tax system, rates rise as income increases. There are seven federal individual income tax brackets; the federal corporate income tax system is flat. s, which are needed in order to be part of this calculator.