Will Truckers Get a Tax Cut? Only if the Child Tax Credit Rises Significantly – By John Carney (breitbart.com) / Oct 12 2017
President Trump pitched his tax overhaul plans to truckers on Wednesday evening, though many of the men and women behind the wheels of U.S. trucks may see little or no direct benefit.
The reason: many truck drivers do not earn enough income to owe federal income taxes. For others, the benefits will largely depend on what happens to tax credits for children.
The tax framework released by the Trump administration last week nearly doubles the standard exemption from $12,700 for a married couple to $24,000. But it also would eliminate the personal exemption of $4,050 per person, which for a family of four amounts to $16,200. So for a married couple with two children, their basic deductions under current law would be $28,900. Which means that the Trump plan actually lowers the basic deductions available for middle-class families.
In other words, under the Trump plan more of a family’s income would be subject to income tax than under current law. So even if their rates fall, they could still wind up paying more in taxes.
There’s very little in the framework, moreover, that would directly benefit most truckers. According to the Labor Department, the median annual income of a trucker is around $40,000. A married couple with two children with $40,000 would have no income liability at all under current law. In fact, they would be entitled to an earned income tax credit refund of around $2,000.
The median income for a trucker who works for a private fleet is around $73,000, according to 2015 data from the American Truckers Association. This is also probably a realistic estimated income for a trucker whose spouse is a second household income earner. At that level of income, a married couple filing jointly would have taxable income of around $44,100 after deductions that would be taxed at 10 percent for the first $18,650 and 15 percent for the remainder. The family would owe around $5,680 before taking the child tax credit or $3,680 after taking it. Under the GOP framework, the family would have around $49,000 in taxable income after deductions, while the 10 percent and 15 percent tax brackets would be replaced by a single 12 percent bracket. This would increase the family’s tax bill by about $200.
Any tax cut for this driver’s family would depend on an increase in the child tax credit, something the framework called for but did not specify. Currently, the couple could deduct $1000 per child. If the tax credit were increased by only 10 percent, they would see no tax cut at all. If it increased by less, they would get a tax hike. If it is increased by more than 10 percent, they will get a tax cut.
So what is going to happen to the child tax credit? Unfortunately, Trump didn’t offer more details Wednesday.
“We will substantially increase the child tax credit to save working families even more money,” Trump said. “The strength of our nation is determined by the strength of our families, and we are committed to helping parents make starting and raising a family more affordable.
Trump also pointed out the framework would allow a new $500 tax credit for households with dependent adults such as elderly grandparents. This too would benefit many middle-class families.
Trump argued that changes to the corporate tax code would also benefit truckers by accelerating economic growth. That’s likely true but the benefits would be indirect, coming from incentives for businesses to invest and expand in light of lower tax rates. Trump’s economic advisers claim that cutting corporate taxes would also boost wage growth, providing up to $4000 in additional wage growth according to the Council of Economic Advisers.
Trump’s economic advisers claim that cutting corporate taxes would also boost wage growth, providing up to $4000 in additional income for the average American family according to the Council of Economic Advisers. If that’s correct, that will boost the after-tax income of middle-class families.
Under current law, a family of four earning the median household income in the U.S. of $59,000 would, after the standard and personal deductions, have taxable income of around $30,100. The first $18,650 of this income would be taxed at 10 percent and the rest at 15 percent, for a tax liability of around $3580. After tax credits for the two children, the tax bill would come to $1,580. So the family of four would have after-tax income of $57,420.
So what happens if the family earns an additional $4,000 and pays its taxes under the Trump framework? The family would have $39,000 in taxable income, all of it taxed at the new 12 percent rate. This would produce a tax liability of around $4,680. If the child tax credits remain unchanged, the tax bill would come to $2,680. After taxes, household income would be $60,320. So that’s nearly a $3,000 raise. A higher child tax credit could improve the numbers even more.
But, of course, the connection between corporate tax rates and wage growth is highly speculative and indirect. Even in hindsight, it will be hard to determine the extent to which corporate tax cuts contributed to wage growth.
http://www.breitbart.com/big-government/2017/10/12/gop-tax-plan-not-offer-much-truck-drivers/
PB/TK – There is no guarantee that a company is going to raise wages $4,000/year/employee due to corporate tax cuts. Sure anyone could use an extra $334/monthly or roughly a little over $4/hour.
If anything, a mass majority of the corporate tax cut is gonna be divided up, with highest percentage of that money sitting in a bank to be used as year end bonus money. At best, you’re looking at $0.30/hour raise
