The draft legislation is less plutocratic than an earlier outline, for whatever that’s worth.
The Tax Policy Center said it found an error and had withdrawn its analysis of the Republican tax bill.
“This error involved the additional child tax credit component of the proposed legislation,” a spokesperson said in an email. “We are in the process of revising our analysis and will release a corrected version as soon as possible. We are removing all related analyses from our website.”
The richest 1 percent of Americans would reap 48 percent of the benefits of Republican tax reform legislation, according to a new analysis by the nonpartisan Tax Policy Center.
At the same time, although nearly half the plan’s benefits would flow to the wealthiest Americans, the legislation Republicans introduced last week is less plutocratic than a rough outline of the plan from September. A Tax Policy Center analysis of the earlier framework said that 79 percent of its benefits would accrue to the richest 1 percent.
The new legislation includes a top tax rate of 39.6 percent on incomes above $1 million, which the earlier framework had only said might be a possibility. Also, instead of outright repealing a tax on transfers of ultra-wealthy estates, the new bill wouldn’t fully repeal the estate tax until 2024.
Still, the new analysis says not everybody would get a tax break under the legislation. “In 2018, slightly more than 12 percent of taxpayers would experience a tax increase relative to current law,” the TPC’s analysis says. “That share would rise to slightly more than 28 percent in 2027.”
Republicans are hoping to send a tax reform bill to President Donald Trump’s desk by the end of the year. To that end, the House Ways and Means Committee started the process of advancing the legislation on Monday. Committee Chairman Kevin Brady (R-Texas) said that if it becomes law, “middle-income families will see their after-tax incomes go up by an average of roughly $2,600.”
The heart of the bill is a reduction in the corporate tax rate from 35 to 20 percent, plus cuts to small business and individual income taxes. Those cuts would amount to better than $2 trillion less revenue over 10 years, but the bill offsets some of the revenue loss by eliminating deductions and exemptions used by most middle- and upper-class taxpayers. The trade-offs in the plan have made it difficult for Republicans to guarantee that all middle-class households would definitely benefit if it becomes law.
The TPC said that a decade from now, 57 percent of taxpayers would get an average cut of $2,400, while 28 percent would face an increase of nearly $2,000.
The trade-offs will likely make it difficult to get the plan through Congress. One obstacle in the House of Representatives is that Republicans from high-tax states like New York and New Jersey are balking at a proposal to curtail a deduction for state and local taxes.
The Joint Committee on Taxation has found that most households would pay less in taxes under the plan, but some would pay more. The JCT, one of Congress’ in-house legislative scorekeepers, said in a Friday analysis that by 2027 the average household earning between $20,000 and $40,000 would see higher taxes, as would the average household in the $200,000-to-$500,000 income range.
A spokesperson for Ways and Means told The Washington Post that the JCT’s analysis fails to account for the economic growth that would result from the tax cuts. A strong economy typically improves government revenue, though the idea that tax cuts can pay for themselves through economic growth is a bit of a myth.