How The GOP Tax Plan Will Affect You
RACHEL MARTIN, HOST:
President Trump has signed sweeping tax cuts into law this morning. He did so before heading off to his Mar-a-Lago resort in Florida. Corporations and other businesses are the largest beneficiaries of this tax overhaul. But big changes are in store for individuals as well. I talked about this with NPR senior business editor Uri Berliner, about how changes to the tax code are already having an impact.
URI BERLINER, BYLINE: There are a couple of ways it's going to be felt right away - like, right now, even before the end of the year. The first one has to do with your charitable contributions. And some people are going to accelerate their charitable giving and give more this year in the last few days of the year. I talked to a senior executive at the United Way, and he told me they expect to see a big bump in year-end giving, even bigger than normal. But the reason behind this late rush of contributions is something that charities aren't really happy about.
MARTIN: So explain. This clearly isn't just people are feeling more altruistic.
BERLINER: Well, under the tax bill, the standard deduction nearly doubles. So for a family of four, next year, it'll be $24,000. Now, the standard deduction is the amount of income that you're automatically not taxed on. So next year, more households are expected to take advantage of that. They'll take that deduction instead of itemizing. It just won't make sense for them to itemize anymore. And they won't be taking deductions for charitable contributions. And that worries charities, not that people are going to stop giving but that they'll give less without this tax break.
MARTIN: Right. All right, so there's something else changing with property taxes. Can you explain this?
BERLINER: Yeah. Some people are going to prepay their property taxes right now before the end of the year. That's to take advantage of property tax deductions that are still available to them right now that go away in 2018. Under the tax bill, there's a cap on property tax deductions.
MARTIN: What about tax rates themselves? I mean, that's what this whole thing was about. When will people notice that change?
BERLINER: Well, it could happen as soon as February. Workers would see the lower tax rates reflected in their paychecks. But for a lot of people, they're going to really notice that the big impact will be after they file their taxes for their 2018 income and start getting refunds in 2019.
MARTIN: All right, so most people are going to get some kind of tax cut next year. How big?
BERLINER: Well, it really varies widely. The Tax Policy Center - it's a think tank - they estimate the average tax cut will be $1,600 next year. But that's an average. As one accountant told me this week, people are not hypotheticals. The amount of your tax break is going to depend on a lot of factors, including where you live, whether you have children and how much money you earn. Higher-income people will generally get larger reductions in their taxes in terms of the cash money that they receive.
BERLINER: And that reason is pretty straightforward - wealthier people have higher taxable income. They pay more taxes, and they're going to get a bigger break under this plan.
MARTIN: All right. And before I let you go, one of the biggest changes - most significant changes has to do with health care - right? - not taxes. Can you explain the effect of this?
BERLINER: Exactly. Remember, there's a penalty if you don't have insurance under Obamacare. That goes away in 2019. So the penalties are a central component of the health care plan because if you get healthier people to sign up, it keeps overall insurance costs down. But with no penalty, a lot of people just aren't going to buy insurance.
MARTIN: And what will that mean?
BERLINER: Well, two consequences - one, more people take the risk of being uninsured. And two, health care costs are likely to go up for those people remaining in the Obamacare exchanges.
MARTIN: All right, NPR's senior business editor Uri Berliner.
BERLINER: Thanks, Rachel.
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