Report: Richest benefit the most
Top IRS cuts seen as going to those who earn $730,000-plus
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.