How the GOP tax plan could impact Massachusetts taxpayers
Here's how the GOP tax bill could impact Massachusetts taxpayers:
Single filers with annual incomes between $38,700 and $82,500 and joint filers with income between $77,400 and $165,000 would be in the 22 percent tax bracket.
In 2017, single filers earning between $37,950 and $91,900 and joint filers earning $75,900 to $153,100 fall into a 25 percent tax bracket.
The Republican tax bill increases the flat amount filers can deduct from their taxes without questions asked, known as the standard deduction, to $24,000 for joint filers and $12,000 for individual filers beginning in tax year 2018.
In the 2017 tax year, individuals who elect not to itemize their deductions can reduce their adjusted gross income by claiming a $6,350 standard deduction. Joint filers, meanwhile, can claim a $12,700 standard deduction.
Republican leaders billed the change as a way to simplify the tax filing process, contending that increasing the standard deduction would lead fewer taxpayers to claim itemized deductions and allow them to file their taxes on a sheet of paper the size of a postcard.
Allen Falke, a tax attorney with Mirick O’Connell, agreed that the bill's nearly doubling of the standard deduction should make the tax filing process more simple for some filers, adding that the GOP plan's cap on state and local tax deductions could make it hard for filers to have enough deductions to exceed the new standard amounts.
"A married couple, they would have to have $24,000 of itemized deductions before they even have to worry about itemizing. And, now we've capped our state and local taxes at $10,000 -- that is usually a large itemized deduction ... what else do we have for deductions? The biggies are mortgage interest and charitable contributions," he said. "Those would have to exceed $14,000 before they begin to itemize."
Massachusetts Secretary of the Commonwealth William Galvin contended that the Republican tax bill's cap on property and state and local tax deductions would disproportionately hurt Massachusetts homeowners.
"This bill, if it becomes law, will be terrible for many Massachusetts families. Particularly in cities and towns like Newton and Brookline, where property tax bills alone regularly exceed $10,000, families will be seeing higher tax bills," he said in a statement.
Galvin noted that the average residential property tax bill in Newton and Brookline is nearly $12,000.
The secretary further raised concerns that the GOP tax bill could negatively impact public education in Massachusetts, where school are funded in large part through local property taxes.
"Eliminating the property tax deduction discourages homeowners from making improvements to their homes that could result in higher property assessments," he said. "Less revenue for the cities and towns means less money for our students."
The secretary has urged other states that could be disproportionately affected by the GOP tax plan to pursue legal challenges on the basis of equal protection.
Falke called the changes impacting the state and local tax deductions, as well as the new $750,000 cap on mortgage interest deductions, "huge."
"The most commentary that I hear about is the $10,000 limit on state and local taxes," he said. "That's huge. Home equity interest is no longer deductible, that's a big deal. A lot of people look at their houses as a source of cash and they say, 'Well, I can deduct the interest I pay,' and that's no longer the case. In areas that have high prices for homes, the cap on how much you can deduct interest on is now $750,000."
That cap, Falke offered, doesn't get taxpayers far in areas like Boston or California.
"If you think about high-tax jurisdictions -- like California and New York -- that have high income tax rates, high property taxes and expensive houses. It's kind of a one-two-three punch," he said. "You're being limited on the amount you can deduct in interest, you're now limited on your deduction for real estate taxes and income taxes."
The Institute on Taxation and Economic Policy, a left-leaning research organization, projects that the Republican-backed tax overhaul legislation will primarily provide relief to the richest Massachusetts residents, while increasing taxes for lower-income families.
Under the GOP tax overhaul, all Massachusetts filers would see tax bills reduced in 2019.
The poorest, or those with an average income of $15,800 would see a $90 tax cut, while those earning an average annual income of $36,600 would see a cut of nearly $500 in 2019, an ITEP analysis found.
Middle income filers, or Massachusetts residents earning between $48,770 and $143,650, ITEP projected, should to see a tax cut of more than $1,000, while those with incomes between $143,650 and $332,600 should see a tax cut of nearly $3,500 in 2019.
Those earning between $332,600 and $808,270 are expected to see an average tax cut of $17,860, while the richest 1 percent could see their taxes reduced by nearly $85,000 on average, according to the ITEP analysis.
That tax relief, however, is expected to go down by 2027.
Then, the richest 1 percent of Massachusetts filers, or those earning more than $1.2 million annually, are expected to see an average tax cut of $13,230, while the poorest 40 percent, those earning less than $70,430 a year, would see their tax bill increase by $50 on average, ITEP projected.
Those with annual incomes between $70,430 and $1.2 million, in turn, could see their taxes reduced by $30 to $1,270 on average in 2027, ITEP estimated.
Republicans, meanwhile, have contended that the “typical” American family of four would see an initial tax cut of $2,000 under the GOP plan.
Falke, however, said it's hard to calculate the bill's average tax impact given the number of variables that exist in the tax code.
"It's very easy to come up with a fact pattern and say, 'OK, a family of four making $50,000 with $5,000 of this deduction and $3,000 of this deduction, this is what they pay now, this is what they'll pay later. But, the 'average' person doesn't exist," he said. "It is very taxpayer-specific, particularly at the individual level."
Single filers with annual incomes between $38,700 and $82,500 and joint filers with income between $77,400 and $165,000 would be in the 22 percent tax bracket.
In 2017, single filers earning between $37,950 and $91,900 and joint filers earning $75,900 to $153,100 fall into a 25 percent tax bracket.
The Republican tax bill increases the flat amount filers can deduct from their taxes without questions asked, known as the standard deduction, to $24,000 for joint filers and $12,000 for individual filers beginning in tax year 2018.
In the 2017 tax year, individuals who elect not to itemize their deductions can reduce their adjusted gross income by claiming a $6,350 standard deduction. Joint filers, meanwhile, can claim a $12,700 standard deduction.
Republican leaders billed the change as a way to simplify the tax filing process, contending that increasing the standard deduction would lead fewer taxpayers to claim itemized deductions and allow them to file their taxes on a sheet of paper the size of a postcard.
Allen Falke, a tax attorney with Mirick O’Connell, agreed that the bill's nearly doubling of the standard deduction should make the tax filing process more simple for some filers, adding that the GOP plan's cap on state and local tax deductions could make it hard for filers to have enough deductions to exceed the new standard amounts.
"A married couple, they would have to have $24,000 of itemized deductions before they even have to worry about itemizing. And, now we've capped our state and local taxes at $10,000 -- that is usually a large itemized deduction ... what else do we have for deductions? The biggies are mortgage interest and charitable contributions," he said. "Those would have to exceed $14,000 before they begin to itemize."
Massachusetts Secretary of the Commonwealth William Galvin contended that the Republican tax bill's cap on property and state and local tax deductions would disproportionately hurt Massachusetts homeowners.
"This bill, if it becomes law, will be terrible for many Massachusetts families. Particularly in cities and towns like Newton and Brookline, where property tax bills alone regularly exceed $10,000, families will be seeing higher tax bills," he said in a statement.
Galvin noted that the average residential property tax bill in Newton and Brookline is nearly $12,000.
The secretary further raised concerns that the GOP tax bill could negatively impact public education in Massachusetts, where school are funded in large part through local property taxes.
"Eliminating the property tax deduction discourages homeowners from making improvements to their homes that could result in higher property assessments," he said. "Less revenue for the cities and towns means less money for our students."
The secretary has urged other states that could be disproportionately affected by the GOP tax plan to pursue legal challenges on the basis of equal protection.
Falke called the changes impacting the state and local tax deductions, as well as the new $750,000 cap on mortgage interest deductions, "huge."
"The most commentary that I hear about is the $10,000 limit on state and local taxes," he said. "That's huge. Home equity interest is no longer deductible, that's a big deal. A lot of people look at their houses as a source of cash and they say, 'Well, I can deduct the interest I pay,' and that's no longer the case. In areas that have high prices for homes, the cap on how much you can deduct interest on is now $750,000."
That cap, Falke offered, doesn't get taxpayers far in areas like Boston or California.
"If you think about high-tax jurisdictions -- like California and New York -- that have high income tax rates, high property taxes and expensive houses. It's kind of a one-two-three punch," he said. "You're being limited on the amount you can deduct in interest, you're now limited on your deduction for real estate taxes and income taxes."
The Institute on Taxation and Economic Policy, a left-leaning research organization, projects that the Republican-backed tax overhaul legislation will primarily provide relief to the richest Massachusetts residents, while increasing taxes for lower-income families.
Under the GOP tax overhaul, all Massachusetts filers would see tax bills reduced in 2019.
The poorest, or those with an average income of $15,800 would see a $90 tax cut, while those earning an average annual income of $36,600 would see a cut of nearly $500 in 2019, an ITEP analysis found.
Middle income filers, or Massachusetts residents earning between $48,770 and $143,650, ITEP projected, should to see a tax cut of more than $1,000, while those with incomes between $143,650 and $332,600 should see a tax cut of nearly $3,500 in 2019.
Those earning between $332,600 and $808,270 are expected to see an average tax cut of $17,860, while the richest 1 percent could see their taxes reduced by nearly $85,000 on average, according to the ITEP analysis.
That tax relief, however, is expected to go down by 2027.
Then, the richest 1 percent of Massachusetts filers, or those earning more than $1.2 million annually, are expected to see an average tax cut of $13,230, while the poorest 40 percent, those earning less than $70,430 a year, would see their tax bill increase by $50 on average, ITEP projected.
Those with annual incomes between $70,430 and $1.2 million, in turn, could see their taxes reduced by $30 to $1,270 on average in 2027, ITEP estimated.
Republicans, meanwhile, have contended that the “typical” American family of four would see an initial tax cut of $2,000 under the GOP plan.
Falke, however, said it's hard to calculate the bill's average tax impact given the number of variables that exist in the tax code.
"It's very easy to come up with a fact pattern and say, 'OK, a family of four making $50,000 with $5,000 of this deduction and $3,000 of this deduction, this is what they pay now, this is what they'll pay later. But, the 'average' person doesn't exist," he said. "It is very taxpayer-specific, particularly at the individual level."
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