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Financial Planning > Tax Planning > Tax Deductions

House Panel Passes GOP Tax Plan to Raise Standard Deduction

By Melanie Waddell

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What You Need to Know

  • The bill would increase the standard deduction by $2,000 per individual in 2024 and 2025.
  • More than 90% of taxpayers take the standard deduction, Ed Slott says.
  • Richard Neal, the top Democrat on the committee, blasted the bill for not expanding the child tax credit.

The House Ways and Means Committee passed late Tuesday the American Families and Jobs Act, a series of tax-related bills that Committee Chairman Jason Smith, R-Mo., said is designed to help ease the pain of high inflation.

The package includes three bills: the Tax Cuts for Working Families Act, H.R. 3936; the Small Business Jobs Act, H.R. 3937; and the Build It in America Act, H.R. 3938.

Jeff Bush of The Washington Update said Monday that the plan is “a resurrection of the tax bill that both parties worked on at the end of last year, although with additional asks.”

The Tax Cuts for Working Families Act “would temporarily boost the standard deduction by $2,000 for single filers and $4,000 for married filers for 2024 and 2025, and the bonus amount would phase out for single taxpayers with incomes above $200,000 and married taxpayers with incomes above $400,000,” Erica York, senior economist and research manager at the Tax Foundation in Washington, told ThinkAdvisor Monday in an email.

Ed Slott of Ed Slott & Co., told ThinkAdvisor Wednesday in an interview that the GOP plan includes “common sense” provisions that “would help taxpayers.” For instance, the boost in the standard deduction would help a “large swath” of taxpayers, Slott said, adding that “more than 90% of taxpayers take the standard deduction anyway.”

The series of bills now moves to the full House.

Rep. Richard Neal of Massachusetts, the top Democrat on the committee, called the GOP tax package the Tax Scam 2.0, saying it “focuses on restoring corporate giveaways to the wealthy and well-connected before restoring the tax credits that cut child poverty in half, and in this provision [increasing the standard deduction], we see that even when Republicans try to cut taxes for families, they miss those who need it most.”

Added Neal: “The poorest fifth of Americans would receive just 2% of the benefits of this provision, and on average, that means a tax break of just $30 next year. As the only change to the individual side of the tax code, I must admit it feels like an afterthought. Why ignore one of the most important policies for working families if cutting taxes for working families is the goal?”

Melanie Waddell

@Think_MelanieW

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