Re­port: Rich­est ben­e­fit the most

Top IRS cuts seen as go­ing to those who earn $730,000-plus

The Dallas Morning News - - Nation - Alan Rappe­port, The New York Times

WASH­ING­TON — The Repub­li­can 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 that 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 omit­ted many de­tails that could change the dis­tri­bu­tional im­pact. For in­stance, the plan called 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 opened the door for adding a fourth, higher tax bracket for the rich­est Amer­i­cans, which would also change the dis­tri­bu­tional im­pact.

Still, the re­port makes clear that, even with those changes, the plan might not 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. In­di­vid­ual in­come tax rev­enue 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, codi­rec­tor of the Tax Pol­icy Cen­ter.

The loss of de­duc­tions would hit the up­per mid­dle class the most, and more than onethird of the tax­pay­ers who earn $150,000 to $300,000 could see their taxes go up next year, the re­port said. They would be hit par­tic­u­larly hard by the re­peal of the de­duc­tion for state and lo­cal taxes.

Gary Cohn, di­rec­tor of Trump’s Na­tional Eco­nomic Coun­cil, said Thurs­day that the typ­i­cal Amer­i­can fam­ily mak­ing $100,000 per year would prob­a­bly get a $1,000 tax cut next year. He sug­gested this would stim­u­late the econ­omy as peo­ple put their ad­di­tional money to­ward ex­pen­di­tures such as kitchen ren­o­va­tions and new cars.

The Tax Pol­icy Cen­ter es­ti­mates the plan would cost $2.4 tril­lion over a decade. Repub­li­cans are count­ing on a surge of eco­nomic growth to pay for the tax plan, and the Tax Pol­icy Cen­ter anal­y­sis does not ac­count for those “dy­namic” ef­fects. How­ever, the group’s an­a­lysts said that its pre­vi­ous stud­ies of re­cent Repub­li­can tax plans showed lit­tle im­pact from growth on rev­enue, largely be­cause of the like­li­hood that deficits would lead to higher in­ter­est rates.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.