Local CPA, economist discuss how GOP tax reform could affect mid - FOX 8 WVUE New Orleans News, Weather, Sports, Social

Local CPA, economist discuss how GOP tax reform could affect middle class

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NEW ORLEANS, LA (WVUE) -

With the Congress well on its way to sending down tax reform to U.S. taxpayers, many locals wonder how middle-class wage earners will fare. The House and Senate have both passed versions of tax reform and are expected to settle on a final tax code overhaul package as early as this week.

"A middle-class wage earner would be a single taxpayer making under $100,000 a year, and married filing jointly making under $250,000 a year where most spouses work,” said Jerry Schreiber, a veteran CPA based in Metairie.

FOX 8 News asked Schreiber how both the Senate and House passed versions of tax reform could affect federal income tax filers.

"The preliminary indications for a single taxpayer who would be a wage earner making under a hundred thousand dollars a year under both the House and the Senate proposals they would probably pay less tax than they are paying now, or rather they would pay for 2017,” Schreiber continued.

He put together a possible outcome for a married couple filing a joint federal return who has two children, own their together earn $100,000 annually.

"They own a home, so they pay real estate tax, and they may pay a mortgage and they pay a small amount in charitable contribution. Now under this scenario, the taxpayers would pay $9,736 in federal income tax. Now under the Senate plan they would pay $8,739, and under the House plan they would pay $9,120, so under both sets of circumstances there is a savings for these taxpayers for 2018 under both proposals,” said Schreiber.

But he noted that the anticipated will not likely amount to thousands of dollars.

"It could be anywhere from $500 to say $1,500. It's not going to be any large windfall,” Schreiber said.

Currently there are seven income tax rates. The House bill reduces them to just four, while the Senate bill retains seven rates but reduces the amount of them.

"And so it is possible because of the way the brackets cut off and whatever the compromise bill comes out that there will be some individuals who could pay a little bit more and that is being acknowledged by Sen. McConnell now,” Schreiber said.

Both the House and Senate approved bills double the standard deduction to $12,000 for individuals and $24,000 for joint-filers.

"This is the one that affects the middle class. Most people take the standard deduction, they don't itemize, and so increasing the standard deduction is where they're going to get their tax savings.The question is, is that going to be lost because of the other issues. For instance, if you're making payments on interest rate or your loans or if you have medical deductions.” said UNO Economist Walter Lane.

"It's simplifying the tax administration, meaning that it will level the playing field in a certain sense with those who don't itemize versus those who do itemize,” said Schreiber.

And then there are questions over whether the tinkering with the home mortgage interest deduction could actually discourage home ownership in many communities.

"If there's no incentive for a taxpayer to be able to itemize deductions on their income tax because they don't get an interest deduction, then they will have to weigh the circumstances and the economic models whether they come out better being an homeowner or just renting,” Schreiber said.

Both versions lower the corporate tax rate from 35 percent to 20 percent. Dr. Lane believes that will spur job creation.

"That is a good thing. We do have the highest corporate tax rates in the World and it makes us uncompetitive, and that makes people want to move things offshore. So bringing those back that will be a good thing, how big the stimulus will be is where people differ,” Lane stated.

Dr. Lane also said it makes sense that the rich would get a bigger tax break in the Republicans’ tax reform package.

"If you start doing tax cuts, who's going to get benefit, which is the wealthy that are paying taxes disproportionately,” he said.

Schreiber said state revenues could also be affected.

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