Experts around Cobb say most residents will see a reduction in their taxes under the new tax law passed by Congress this week.

The tax law, expected to be signed into law by President Donald Trump early next year, reduces the tax rates for most of the seven federal tax brackets and nearly doubles the standard deduction, among other provisions.

“The average taxpayer is most likely going to save a little bit of money because their rate is going to be reduced by whatever bracket they fall into, and raising the standard deduction will probably make it easier for the average Joe to more simply file their tax return,” said Kenneth Baer, owner and managing partner of the east Cobb financial planning firm Baer Wealth Management.

Taxpayers have the option of taking a standard deduction or itemizing individual deductions when they file their tax returns. By increasing the standard deduction and limiting other deductions, such as a deduction for state and local taxes, the number of taxpayers who itemize is likely to decrease, Baer said.

The balance between the reduction in tax rates and elimination or capping deductions will likely result in a lower tax bill for most people, but every case is different, explained Roger Tutterow, economics professor at Kennesaw State University and director of its Econometric Center.

“It’s going to depend on what their household looks like,” Tutterow said. “I think most individuals will see their taxes come down, and clearly, it’s not just the tax rates that changed, it’s, for example, there’s a higher child tax credit, there’s a higher standard deduction. Some exemptions or deductions are going away. For example, the ability to take off for paying state and local taxes has been capped now. … So you may make out better in terms of having a lower marginal tax rates, but some of your deductions may be eliminated or capped. So it’ll be interesting to see.”

The amount of the reduction in taxes for middle-income taxpayers is unlikely to be life-changing, Baer said.

“Your average Joe, in my opinion, and this is just my opinion, it’s not going to make much difference in their lives,” Baer said. “They’re going to pay less, which is good, but it’s not a big difference maker.”

The balance between lower rates and limited deductions may not swing in favor of some higher-income individuals, according to Dan DiLuzio, CPA at Henssler Financial, which has an office in Kennesaw.

“I’ve got a lot of clients in the upper brackets,” DiLuzio said. “They may not see as much as they hoped they would see because their itemized deductions are going to be limited, particularly when they’ve had high real estate taxes or high state income taxes, that’s going to go away. And then their tax brackets haven’t really decreased as much as some of the other brackets have.”

Jean Hawkins, managing partner at Hawking, Moore and Cubbedge, a tax planning and business accounting firm in Marietta, went further, saying most of her high-income clients will see higher taxes as a result of the bill.

“Even though the standard deduction has been doubled, the personal exemption is gone and the state and local tax deduction has been capped,” Hawkins said. “I think those things are not going to make up for the fact that the brackets have been lowered slightly. I think that’s not going to net out for most of our clients.”

An analysis by The Tax Policy Center estimates that all income groups will see a reduction in taxes in the short term, however.

“Compared to current law, taxes would fall for all income groups on average in 2018, increasing overall average after-tax income by 2.2 percent,” the analysis reads. “In general, tax cuts as a percentage of after-tax income would be larger for higher-income groups, with the largest cuts as a share of income going to taxpayers in the 95th to 99th percentiles of the income distribution.”

Many of the benefits in the tax bill for individuals will expire by 2027. Republicans in Congress had those provisions sunset in order to pass the bill with only 51 votes in the Senate through a process called reconciliation, Tutterow explained.

“One of the dynamics that’s playing out though is that a lot of the rhetoric is saying, ‘Well, individual income taxes may come down, but there’s a window on how long those lower rates apply. And in the future those rates will go back up.’ And of course, that was done as a way to get the bill through the Senate,” Tutterow said. “By sunsetting the lower individual rates, it allowed them to pass the bill and still come in under the rules of reconciliation.”

Tutterow said the decision to put an end date on the individual portions of the tax bill while making the corporate tax benefits permanent was a calculated move by Congressional Republicans.

“I think there’s a calculated bet being made that Congress will extend lower tax rates for individuals in the future,” he said. “I think the sense was if they’re going to cut the corporate rate, now’s the time to do it permanently because they have the votes. Several years down the road, Republicans may not be in the majority, and then a lower corporate rate might not survive if it were sunset. So I think that’s why the corporate rate was made permanent, while the individual tax rates remained with a sunset provision.”

BUSINESSES

The largest cuts in the tax bill are for corporations, and Congressional Republicans are betting that putting more money in the pockets of business owners will lead to higher wages, more jobs and increased investment. Whether or not that will happen remains to be seen, Tutterow said.

“One thing we have to remember: it’s easy to say the business owner is better off,” Tutterow said. “We need to remember that for large businesses, we’re talking about stockholders. We’re talking about people who own stock in the company. They’re the beneficiaries. Now, whether the additional after tax income will be used to hire more people or be used to invest in capital equipment to grow the enterprise or whether it will be returned to shareholders is somewhat an open question. Therein lies the real question mark about how stimulative the plan is for employment and investment.”

Wage growth depends on several factors, including the availability of labor and productivity, he said.

“It may be unpopular to say this, but businesses hire people and businesses give people raises because they need to,” Tutterow said. “The reason we see wages rising is it’s necessary to attract and retain the workers you need. So I think that’s an important consideration. I don’t think that just because businesses find themselves with additional after-tax profit, they necessarily go hire more individuals. They’re going to find themselves with more after-tax profit and they’re going to decide to move into new markets or launch new products to grow the enterprise, and that’s why they hire new people.”

Baer agreed, saying business owners will do well under the new tax regulations, and more money in their pockets could lead to hiring more people, new technology being developed and higher wages.

“I think that’s the idea behind it. Whether that turns into reality or not, we don’t really know. … The overall theme is if you’re a business owner, you have the potential to seriously negate your tax liability. It depends on the kind of business, it depends on how you receive your income, but there is a lot of potential there to lower your taxable income or what you’re paying in taxes as a wealthy — a business owner who’s doing very well.”

Manufacturing is one industry that could see growth as a result of the tax changes, Tutterow said.

“That is one of the sectors that there’s some hope that the lower tax rates will improve profitability for domestic production. We have seen an outward migration of production moving to Mexico, Central America and to Asia. And there’s a lot of trends now that are allowing us to be more competitive at bringing production home. And certainly lower tax rates on profits could contribute to that,” Tutterow said.

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(9) comments

Anonymous Commenter

Like Ivanka said on Fox News, we will all be so happy when we fill out our taxes postcard this April. Happiest of all will be the identity thieves stealing our info off these postcards. Except there are no postcards and the tax bill doesn't even affect our paperwork for tax year 2017. Seriously white people, y'all hate black people and Mexicans so much that you handed the country over to these idiots. What up with that. The USA is so doomed.

Anonymous Commenter

After the deficit soars the people who brought the cuts will be raiding social security and Medicare to pay for this transfer of wealth to the rich. And it’s only a temporary cut. And if you pay state taxes you are no longer allowed a deduction which someone negates the slightly lower rates.

Anonymous Commenter

Here we go again, the same lies, taken right from the democrat playbook. As we all know, "the wealthy," as defined by the liberal democrat party, is anyone who has a job and pays taxes. President Trump and the Republicans have given the American people a fantastic Christmas present, which is to allow them to keep more of the money they have earned. Of course, since the democrat party panders to the welfare class, we all know the welfare class does not pay taxes. Talk about a transfer of wealth? Yes, that is exactly what democrats do, when they take working people's money and give it to those who refuse to work. Deficit? No, that is a bald face lie that the liberal media and democrats have been spinning since the tax cut was proposed. You really need to cook up some new lies. And, if you dislike this tax bill so much, then what is your counter proposal. Truth is, the democrats have nothing, absolutely nothing to offer the American people. Democrats are completely absorbed in their hatred of Donald Trump, so much so, that it has blinded their entire party to the truth. So here you go, here is the slogan the democrats will use in the 2018 elections: "We fought the GOP, when the GOP wanted to allow you to keep more of the money you earned." So, go ahead and run with that slogan and see how many offices you win in 2018. At least when Regan gave Americans tax cuts, the Democrats were smart enough to support them, which speaks volumes on just how dumb democrats are today. Democrats were never concerned about a deficit, when Barry O'Blunder handed out his Porkulus money, billions and billions of tax payer money, which the recipients were never held accountable as to what they did with it. Nope, sorry liberals, it has been shown time again that tax cuts will stimulate the economy and set it on fire, meaning more jobs and more money in the pockets of working Americans, yeah, I said working Americans, not the welfare class. Americans know all about democrat lies and the same lies perpetrated by their willing accomplices in the liberal media, and Americans are not buying Fake News and democrat lies anymore. What is good for the democrat party is bad for American, and what is good for America is bad for the democrat party. Thank you President Donald Trump for making America great again. AND, one of the hidden gems in the tax bill is the elimination of the big socialist government individual mandate to pay for Obummercare. Yes! liberty and freedom has been restored to American citizens! Working citizens can no longer be punished by the IRS for not buying Obummercare health insurance.

Anonymous Commenter

The dirty little secret is that corporations will use this money to upgrade their plant with as much robotics as possible. Expect less

middle class jobs as a result.

Anonymous Commenter

Another democrat lie. America has one of the highest corporate tax rates in the world. Lowering corporate taxes will allow business and industry to grow, thus creating more jobs. Automation, robots? Get with the times. That is a world wide fact. Today's world requires people who do not want to work at flipping hamburgers to have some type of technical training, not necessarily a college degree. This is a fact of the times we live in and has nothing to do with corporate taxes.

Anonymous Commenter

The top 1% has held 80% of the wealth since the last "trickle down" tax bill gave it to them. Now they'll have 90% of the wealth, but I guar-on-tee no matter how rich they get, it won't help any of us one iota. It's not as if they lacked the resources to create jobs, so adding to their resources? How does that help anything when they already have plenty of resources to create jobs and / or give salary increases but they flatly refuse to do it?

Anonymous Commenter

Another lie from the democrat play book, and it has no basis in truth whatsoever. Please detail your your "source" of information?

Anonymous Commenter

Rich folk already super rich but none of us getting raises, so what is the point of making the super rich even richer than they are? They still aint giving us any raises. As of matter a fact in 2018 the excuse will be that Trump already gave us raises so we don't need raises, ultimately setting us all back by quite a bit of money when compounding of raises is considered. We get a temporary tax cut, zero raise, then next year taxes go back up and we are worse off than ever. Who does Trump think is going to pay to stay in his hotels? We won't even be able to afford his USA brand baseball caps at this rate.

Anonymous Commenter

Your story has no basis in truth whatsoever. If you think it does, please detail your sources of information, facts, figures, etc. Sounds more like you have an axe to grind against anyone who worked to get an education and now has a secure job.

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