I would like to make the frum world aware that the proposed tax cut, if passed as requested by the president, would be a disaster to the frum Jewish community with large families.
The current tax law allows for each dependent an exemption of $4,050. The proposed bill is eliminating this exemption. This means a family with, let’s say, eight kids now has exemptions of $40,500 (eight kids and two parents).
This is not an exaggeration of the family size in our community. Six to 10 kids is the norm, and I am sure many readers know families that have even 12 or 14 kids.
This hypothetical family, under the new law, now has $40,500 more in taxable income.
Next in the proposed tax law, deductions for state tax will be eliminated. This will be a different increase in income for each taxpayer, but for our example, let’s assume that this payer paid last year low state and city combined taxes of $4,000. New York State and New York City income taxes are among the highest — if not the highest — in the United States. In Lakewood, state taxes are much lower but still significant.
Deductions for real estate taxes will also be eliminated. I don’t know what the average real estate payment is in N.Y.C. and in Lakewood, but I have a relatively small house and pay $8,000 a year.
The big saving under the proposed law is supposed to be the doubling of the standard deduction. This only helps people who do not itemize. Most frum people do itemize. Between the deduction for state and city taxes, real estate taxes, interest on their mortgages and charitable contributions, it is hard to imagine that there are many frum people in N.Y. and N.J. with large families who do not itemize. Therefore, they gain nothing from the doubling of the standard deduction.
So for the hypothetical family above with eight children, their taxable income has been increased under the proposed cut by $40,500 + $4,000 + $8,000 for a total of $52,500.
What is the tax due on this amount? That depends on your bracket. The new tax law proposes three brackets of 12, 25 and 35 percent, plus another possible bracket of an undecided amount.
If this family is in the 25-percent bracket (not the highest), their additional tax is now $13,125. Quite a hefty bill. More children or more income would make this number even higher.
If you agree, call or write your senators and congressmen. Let your friends know to do the same.
Regina F., CPA