October 23, 2024
Republicans have pledged to reinstate Trump’s tax bill after it expires in 2025, but the Tax Policy Center analyzed that 83% of the tax cuts would go to the top 1% in 2027.
The Internal Revenue Service’s annual inflation adjustments, released on Oct. 22, show that American taxpayers will receive higher standard deductions on their 2025 income taxes.
According to ABC News, single taxpayers and married taxpayers filing separately will see a $400 boost, bringing their total in standard deductions to $15,000 for 2025.
Couples who file jointly will see an $800 bump, taking their standard deduction up to $30,000, and heads of households will receive a $600 increase from the amount on 2024’s income taxes, bringing their total to $22,500.
Overall, while income thresholds for income tax brackets scaled up, the top tax rate remains at 37% for individuals who earn more than $626,050 for single taxpayers.
That figure is nearly $20,000 more than in 2024 when $609,350 put a single taxpayer in the highest bracket.
The IRS makes these inflation adjustments yearly, and inflation has featured prominently in the national conversation.
Even though the overall inflation rate is at its lowest rate in nearly three years, some price points reveal that certain industries, such as medical care, the airline industry, auto insurance, and clothes, are still more expensive than they were pre-pandemic.
Although the standard deductions are higher in dollar amount than last year, the increases are lower than in recent years.
For example, between the 2023 and 2024 tax year, single-filer deductions increased by $750, while married couples and heads of households saw their deductions increase by $1,500 and 1,100, respectively.
According to The Washington Post, the IRS announcement marks the last year of the Trump-era Tax Cuts and Jobs Act. Unless Congress extends the law, the rates will revert to previous levels, including a top tax rate of 39.6%.
The expensive tax cuts are a key piece of the economic proposals from former President Donald Trump’s campaign, and he has vowed to reinstate them should he be elected.
According to Dean Baker, a senior economist at the Center for Economic Policy Research, Trump’s tariff proposal will likely adversely affect middle-class and low-income Americans.
“We should just call them taxes on imports because that’s what they are,” Baker told Vox. “We import $4 trillion of goods every year. So that’s a $400 billion tax increase. That’s really quite a hit that’s overwhelmingly going to moderate-income, middle-class people.”
Vice President Kamala Harris, on the other hand, has indicated that she would allow some of the cuts to expire but has promised not to raise taxes on households with an income below $400,000.
According to Vox, Trump’s tax bill was a mixed bag, offering a few positives like an expanded child tax credit and an increased standard deduction; their analysis also showed that the bill had a friendlier tax rate for people making higher incomes than it did for people who make less.
Republicans have pledged to reinstate the bill after it expires in 2025, but the Tax Policy Center analyzed that 83% of the tax cuts would go to the top 1% in 2027.
Lily Batchelder, a New York University professor who worked under President Obama, told the outlet that the bill was essentially crafted to benefit the rich.
“The bill is investing heavily in the wealthy and their children — by boosting the value of their stock portfolios, creating new loopholes for them to avoid tax on their labor income, and cutting taxes on massive inheritances,” Batchelder said.
Batchelder continued, “At the same time, it leaves low- and middle-income workers with even fewer resources to invest in their children and increases the number of Americans without health insurance.”
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