Tax plan’s big winners: Richest, and businesses
Analysis: Large cut for top 1%, giant cut for corporations.
The Republican WASHINGTON — tax plan promoted by President Donald Trump this week as a middle-class tax cut would overwhelmingly benefit the wealthiest Americans and businesses, according to an analysis released Friday by the nonpartisan Tax Policy Center.
The report, which is the first detailed assessment of the plan’s financial impact, found the average tax bill for all income groups would decline by $1,600, or 2.1 percent, in 2018. The biggest decrease would go to those with incomes above $730,000, who would see their after-tax incomes rise by an average of 8.5 percent, or about $129,000.
Those in the middle quintile — with incomes averaging $66,960 — would see their after-tax income rise by 1.2 percent, or about $660.
The breakdown is based on the framework released by the “Big Six” group of Republican lawmakers and administration officials this week, which did not include many details that could change the distributional impact. For instance, the plan calls for an increase in the child tax credit but did not specify how much it would rise and whether it would be across income groups. The plan also opens the door for adding a fourth, higher tax bracket for the richest Americans, which would also change the distributional impact if enacted.
Still, even with those changes, the report makes clear that the plan may not
Plan apparently not a salve for middle class.
be the salve for the middle class that Trump has been pitching.
The plan would provide enormous benefits to corporate America, with a $2.6 billion cut in business taxes. Revenue from individual income taxes would actually increase by $470 billion, largely as a result of changes in personal deductions and exemptions as well as an increase in the bottom tax rate to 12 percent from 10 percent.
“Tax collections would shift dramatically from businesses to individuals,” said Eric Toder, co-director of the Tax Policy Center.
The loss of deductions would hit the upper middle class the most, and more than one-third of the taxpayers who earn $150,000 to $300,000 could see their taxes go up next year, the report found. They would be hit particularly hard by the repeal of the state and local tax deduction.
The Tax Policy Center estimates the plan will cost $2.4 trillion over a decade. Republicans are counting on a surge of economic growth to pay for their tax plan and the Tax Policy Center analysis does not account for those “dynamic” effects. However, the group’s analysts said its previous studies of recent Republican tax plans showed little impact from growth on revenues, largely because deficits would lead to higher interest rates.
The plan would eliminate many corporate “loopholes” and deductions, such as the state and local tax deduction. But it would also get rid of many provisions that are costly to the rich, like the estate tax and the alternative minimum tax.
“It’s hard to see if you continue to have those provisions in a tax proposal that it doesn’t benefit high-income individuals and households disproportionately,” said Mark Mazur, director of the Tax Policy Center.