Even with recent changes, Donald Trump’s new tax plan is still a huge giveaway to the rich. But there may be one loser in particular: single parents. Despite his claim that everyone will get a tax cut, under Trump’s tax plan, some single parents would see their taxes go up by more than $1,000.
Trump is raising taxes in three ways. First, Trump gets rid of the head of household filing status, which is currently available to single parents and some other unmarried taxpayers who care for another person. Under current law, filing as a head of household reduces someone’s tax bill by lowering the amount of their income that is subject to taxes. It does this by giving them a larger standard deduction than single filers. The standard deduction is a tax deduction set at a fixed amount available to taxpayers who do not itemize deductions such as mortgage interest and charitable contributions. A larger standard deduction means less taxable income, and therefore a lower tax bill. Head of household filers also get a different set of tax brackets than single filers, which increases how much income they can earn before their money starts getting taxed at higher rates.
Under the Trump plan, unmarried parents have to file as single. The most important impact of this change is to significantly reduce the benefit from Trump’s higher standard deduction, which is the most significant way that Trump is claiming to lower taxes for ordinary Americans.
Second, Trump gets rid of personal exemptions, which are another type of tax deduction. Taxpayers get a personal exemption for each person in their household, including themselves and their dependents, and each one lowers how much of their income will be taxed. In 2016, the personal exemption is $4,050, so for a family of two this means that $8,100 of their income will not be subject to federal income taxes.
Third, Trump gets rid of the current 10 percent tax bracket that applies to income at the lowest end. For head of household filers, the 10 percent bracket would apply to the first $13,250 of taxable income. Instead, that income would be taxed at 12 percent under Trump.
To see how this tax increase would work in real life, consider a single mother who makes $34,000 a year with two teenage children, ages 14 and 17. Right now, she gets a $9,300 standard deduction by filing as a head of household. She also gets three exemptions for herself and her two children of $4,050 each, for a total reduction of $12,150. Altogether, the standard deduction and personal exemptions reduce her taxable income to $12,550. This is taxed at a 10 percent rate, so her tax bill comes to $1,255.
Under Trump, the same single mother gets a larger $15,000 standard deduction, but $0 in personal exemptions, which brings her taxable income to $19,000. This means significantly more of her income is subject to taxes compared to current law, expanding her bill. Moreover, Trump taxes this income at 12 percent instead of 10 percent, which results in a tax obligation of $2,280 — $1,025 more than what she owes now.
Since her children are too old for Trump’s child care deduction — which is limited to children under the age of 13 — it wouldn’t help her at all. The good news is that since she benefits from the Earned Income Tax Credit and the Child Tax Credit for working families, she should still get a tax refund. The bad news is that her tax refund would be $1,025 less under the Trump plan than it would be under current law, since her higher tax obligation under Trump’s plan has to be deducted from the refund.
At the same time, Trump would give huge tax cuts to the wealthiest Americans: The top income tax rate paid by millionaires and billionaires would drop from 39.6 percent to 33 percent. And Trump repeals the estate tax, which could mean a tax cut of up to $4 billion for his own family. But repealing the estate tax won’t matter for the struggling single mother, since only the richest 0.2 percent of estates pay any estate taxes.
The huge cost of Trump’s plan also jeopardizes the funding necessary to sustain vital middle-class investments such as Medicare, education, and infrastructure. This is the most important reason that the Trump tax plan would hurt middle-class families. But even when Trump claims that they’ll benefit from his tax cuts, his plan still sticks many struggling families with a tax increase that could be devastating.