Bill's grand design and its impact on middle-class taxpayers: an analysis
The One Big Beautiful Bill Act, recently passed by Republican lawmakers, offers a range of tax benefits for American workers, particularly middle-class taxpayers and retirees. The legislation is primarily focused on extending provisions within the Tax Cuts and Jobs Act of 2017.
## Tax Benefits for Middle-Class Taxpayers
One of the key features of the bill is the prevention of a significant tax increase. It makes permanent the lower tax rates established by the Tax Cuts and Jobs Act, ensuring that tax brackets remain at lower rates and benefiting middle-class taxpayers by avoiding a reversion to higher rates and thresholds.
The legislation also offers substantial tax relief to low-income earners. For instance, it provides a 16.4% tax cut for those earning less than $15,000, a 27.1% cut for those earning between $15,000 and $30,000, a 9.5% cut for those earning between $30,000 and $40,000, and a 7.2% cut for those earning between $40,000 and $50,000.
Another significant provision is the codification of policies to exempt tips and overtime pay from taxes, providing financial relief to working-class Americans.
## Tax Benefits for Retirees
The bill includes a $6,000 "bonus" deduction available to taxpayers aged 65 and older. This deduction, which is designed to offset federal taxes on Social Security benefits, is available for individuals with a modified gross adjusted income (MAGI) of up to $75,000 and couples filing jointly with a MAGI of up to $150,000. Both spouses can claim the deduction if they are 65 or older, totalling $12,000.
The bill also aims to ensure that 88% of seniors receiving Social Security will pay no taxes on their benefits, thanks to the additional deduction.
Other noteworthy provisions of the One Big Beautiful Bill Act include the creation of new deductions for tipped workers and overtime workers, and the auto loan deduction, which is available in tax years 2025 through 2028, at which point it phases out.
The bill sets the second bracket at 12%, the third at 22%, the fourth at 24%, and the fifth at 32%. It retains a 10% tax rate for the lowest bracket. The auto loan deduction is available for eligible vehicles, including cars, minivans, SUVs, pickup trucks, and motorcycles that undergo final assembly in the U.S. and are regulated under the Clean Air Act.
While the One Big Beautiful Bill Act does not completely fulfill Trump's call for "no tax on Social Security," it provides a provision as an alternative. However, it's important to note that the new deductions for tipped workers and overtime workers are set to expire in 2028.
These provisions are designed to provide financial relief and support to both middle-class workers and retirees, aiming to enhance economic stability and reduce tax burdens.
- The One Big Beautiful Bill Act, a piece of legislation recently passed by Republican lawmakers, offers tax benefits not only to middle-class taxpayers but also to retirees.
- One significant tax benefit for retirees included in the bill is a $6,000 "bonus" deduction for taxpayers aged 65 and older, which aims to offset federal taxes on Social Security benefits.
- The bill also attempts to ensure that 88% of seniors receiving Social Security will pay no taxes on their benefits due to this additional deduction.
- Businesses in the automobile industry might benefit from the auto loan deduction, a provision available in tax years 2025 through 2028 for eligible vehicles undergoing final assembly in the U.S. and regulated under the Clean Air Act.
