Re­port: Tax plan re­wards top 1%

Tampa Bay Times - - Front Page -

An anal­y­sis dis­putes GOP prom­ises that the mid­dle class will see big­ger breaks.

The Repub­li­can tax plan would de­liver a ma­jor ben­e­fit to the top 1 per­cent of Amer­i­cans, ac­cord­ing to a new anal­y­sis by a lead­ing group of non­par­ti­san tax ex­perts that chal­lenges the White House’s por­trayal of its ef­fects.

The plan would de­liver far more mod­est tax cuts to most other house­holds — an av­er­age cut of $1,700 for house­holds in 2027, ac­cord­ing to the re­port. But the re­sults would be un­evenly spread, with 1 in 4 house­holds pay­ing more in taxes.

De­spite re­peated prom­ises from Repub­li­can law­mak­ers that the plan is de­signed to pro­vide re­lief to the mid­dle class, nearly 30 per­cent of tax­pay­ers with in­comes be­tween $50,000 and $150,000 would see a tax in­crease, ac­cord­ing to the study by the Ur­banBrook­ings Tax Pol­icy Cen­ter. The ma­jor­ity of house­holds that made be­tween $150,000

and $300,000 would see a tax in­crease.

Mean­while, the study found that 80 per­cent of the tax ben­e­fits would ac­crue to those in the top 1 per­cent. House­holds mak­ing more than about $900,000 a year would see their taxes drop by more than $200,000 on av­er­age.

The re­port was dis­missed by one of the ar­chi­tects of the GOP plan.

“This anal­y­sis is based on guess work and bi­ased as­sump­tions de­signed to pro­mote the au­thors’ point of view” rather than ac­tual de­tail from a bill that has not yet been writ­ten by the com­mit­tees, said An­to­nia Fer­rier, spokes­woman for Se­nate Ma­jor­ity Leader Mitch McCon­nell, R-Ky. McCon­nell was one of the group of “Big Six” Repub­li­can law­mak­ers and White House of­fi­cials who crafted the plan.

But it could also high­light di­vi­sions in the Repub­li­can Party.

“That does not re­flect the hopes and as­pi­ra­tions of Main Street Repub­li­cans around the coun­try,” said John Weaver, a vet­eran Repub­li­can strate­gist to Ohio Gov. John Ka­sich and be­fore that Sen. John McCain. “Re­ward­ing the 1 per­cent, at a time when the gap be­tween the has and has-nots is at a record high isn’t wise, eco­nom­i­cally, and cer­tainly not wise po­lit­i­cally.”

The fact that the plan would have un­even ef­fects, par­tic­u­larly to peo­ple mak­ing be­tween $150,000 and $300,000, was cred­ited to the loss of item­ized de­duc­tions, par­tic­u­larly the abil­ity to deduct state and lo­cal prop­erty taxes from in­come.

The loss of the per­sonal ex­emp­tion, which shields $4,050 of in­come from fed­eral taxes for ev­ery house­hold mem­ber, also would play a ma­jor role in in­creas­ing taxes for some house­holds, the anal­y­sis found — an ef­fect that would get worse over time be­cause the amount of the per­sonal ex­emp­tion kept pace with in­fla­tion.

This week at a speech in In­di­anapo­lis, Trump de­scribed the ef­fects of the tax plan very dif­fer­ently: “We’re do­ing ev­ery­thing we can to re­duce the tax bur­den on you and your fam­ily. By elim­i­nat­ing tax breaks and loop­holes, we will en­sure that the ben­e­fits are fo­cused on the mid­dle class, the work­ing men and women, not the high­est-in­come earn­ers.”

The Tax Pol­icy Cen­ter study was based on a num­ber of as­sump­tions that could change be­cause Repub­li­cans haven’t filled in many of the key de­tails of their tax bill. For ex­am­ple, they haven’t said what tax rate will be levied against spe­cific in­come lev­els or what the ex­panded child tax credit will look like.

Kyle Pomer­leau, di­rec­tor of fed­eral projects at the Tax Foun­da­tion, said that the re­sults were not sur­pris­ing given the as­sump­tions, but noted that the ef­fect on in­come groups could change as de­tails are ham­mered out. For ex­am­ple, the plan al­lows Congress to add a fourth, higher tax bracket above 35 per­cent that could be used to de­crease the tax ben­e­fit to the wealth­i­est house­holds.

How­ever, he noted that the un­even ef­fects of the tax change — with some house­holds pay­ing less and some pay­ing more — is to be ex­pected if there are fun­da­men­tal changes to pol­icy.

“This is some­thing that oc­curs in most poli­cies. … On net, you want most peo­ple to be bet­ter off,” Pomer­leau said. “But across the board, you can find is­sues or in­di­vid­u­als that might be sightly worse off. It’s al­most the na­ture of tax re­form that you can find those cases.”

The anal­y­sis also found the plan would pro­vide dis­pro­por­tion­ately large ben­e­fits for busi­nesses com­pared with what the mid­dle class and low-in­come Amer­i­cans would re­ceive.

“A ma­jor fea­ture is tax col­lec­tions would shift dra­mat­i­cally, from busi­nesses to in­di­vid­u­als,” said Eric Toder, a co-di­rec­tor of the Tax Pol­icy Cen­ter.

The tax plan would in­crease the deficit by $2.4 tril­lion over the first decade, the cen­ter found. Ed Klein­bard, a law pro­fes­sor at the Univer­sity of South­ern Cal­i­for­nia, said that could pose a ma­jor prob­lem, since it is larger than the $1.5 tril­lion rev­enue loss that Se­nate Repub­li­cans agreed to ear­lier this month.

“One thing I find trou­bling about big, deficit-fi­nanced tax cuts is it kind of looks like a free lunch,” said Len Bur­man, a fel­low at the Ur­ban In­sti­tute who for­merly worked at the non­par­ti­san Con­gres­sional Bud­get Of­fice. Bur­man pointed out that the bur­den of the post­poned taxes could fall on lower- and mid­dle-in­come peo­ple in the fu­ture, through tax in­creases or cuts to pro­grams that ben­e­fit those groups. What was sur­pris­ing, he added, was that even in that con­text, there were groups that did not ap­pre­ci­ate the ben­e­fits of that free lunch.

White House of­fi­cials have given con­flict­ing ac­counts of the im­pact of the tax cuts on the wealthy. Trump has said they would re­ceive no ben­e­fit, while Na­tional Eco­nomic Coun­cil di­rec­tor Gary Cohn has said it is ir­rel­e­vant whether they ben­e­fit, be­cause all tax­pay­ers should ben­e­fit. Trea­sury Sec­re­tary Steven Mnuchin has said some up­per­in­come Amer­i­cans will ben­e­fit while oth­ers won’t.

Source: Tax Pol­icy Cen­ter Wash­ing­ton Post

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