A look at the Tax Cuts and Job Act, recently passed by the US House of Representatives, reveals something interesting.
Upper middle-class families, in the seemingly satisfying $150-308k income bracket, will indeed receive a tax cut. But over the next ten years, a surprising number of them – well over a third – could see their taxes rise. Why are so many of these affluent earners being left out of the tax cut largesse?
Should they be up in arms? Perhaps not. The Congressional Budget Office estimates that over the last 30 years, upper middle-class earners have seen their incomes rise by 65%. That’s more than double the improvement recorded in the wages of middle-class taxpayers (the median income is currently around $59,000).
Nevertheless, some upper-bracket earners cry foul. They declare that upper middle-class taxpayers lead lives that are quite similar to those of middle-bracket earners, with their extra income absorbed by the inflated mortgages and taxes of trendier neighborhoods, higher education expenses and other costs related to their greater expectations and lifestyle.
Other analysts see if differently. The upper middle class has done quite well in recent decades and the tax code has played to their advantage, they say. And in fact, under the current House bill, most of them could gain more than they may lose. It might be time for some affluent earners to take on a greater share of the burden, which could have the knock-on effect of opening up more opportunities for middle income citizens.
In the end, there may not be too much need for concern. Many lucrative tax advantages would remain in place for the upper middle-income bracket, including certain college savings accounts and retirement benefits. Affluent earners should keep a close eye on the tax cut issue, which now passes to the Senate.
For more information, please read:
Should America’s Upper Middle Class Take the Biggest Tax Hit? | Wealth Management