Tax cut would fall far short of $3.2T
Government panel’s estimate is half that
President Trump said the tax bill would provide “$3.2 trillion … in tax cuts for American families.” It actually would total about $1.5 trillion in tax cuts for all taxpayers, including corporations.
Trump shows only one side of the tax ledger. He counts tax changes that cut taxes, not those that will increase taxes.
For example, doubling the standard deduction results in $720 billion less in tax revenue over 10 years, but repealing personal exemptions increases tax revenue by more than $1.2 trillion.
Trump’s one-sided description of the tax benefits of the bill came in remarks at the White House as Republican lawmakers celebrated passage of the tax bill, which he signed Friday.
That statistic was echoed in a White House fact sheet on the tax bill released the same day. It read, “The Tax Cuts Act provides $5.5 trillion in tax cuts, $3.2 trillion, or nearly 60 percent, of which go to families.”
It was repeated in a tweet from Ivanka Trump, the president’s daughter, who wrote, “Today marks a great win for all Americans. The Tax Cuts and Jobs Act provides $5.5 trillion in tax cuts,
$3.2 trillion, or nearly 60 percent, of which go to families.”
It’s true that changes in the new law that would cut taxes — for individual, business and international taxes — come to about $5.5 trillion, according to the government’s non-partisan Joint Committee on Taxation. But when all of the provisions are considered — including those that would raise tax revenue — the committee estimates the tax law will result in $1.456 trillion less paid in individual, business and international taxes to the U.S. government over the next 10 years.
That’s why news media outlets typically refer to it as a “$1.5 trillion tax bill.”
The president cited a subset of that
$5.5 trillion, the amount he said would go to “American families.”
To get to the $3.2 trillion figure, the White House tallied the provisions in the tax plan that would reduce tax revenue paid by families to the government, not provisions that would increase them. The tally includes:
$1.2 trillion in cuts through changes to the tax brackets. The new law reduces five of the seven tax rates, including cutting the top rate from 39.6% to 37%.
$720 billion by roughly doubling of the standard deduction (to $12,000 for singles and $24,000 for married people filing jointly).
$573 billion in increased child tax credits.
$637 billion in relief from the alternative minimum tax, which is paid by high-income taxpayers instead of using the regular tax system to calculate tax liability.
Roughly $100 billion from expansion of medical expense deductions and reduced estate tax revenue.
What it does not include are the many offsets in the tax plan. The biggest is the elimination of personal exemptions — a deduction taxpayers receive for each person claimed on tax returns.
Under the old tax code, filers received a personal exemption of $4,050 per person, which means a married couple with two dependents received a personal exemption of $16,200. That goes away under the new law (though as written, it would return after 2025). That provision will increase revenue to the government by a little more than $1.2 trillion over 10 years.
There are other measures that work against taxpayers, including new limits on itemized deductions such as for state and local income taxes and some mortgage deductions.
According to the Joint Committee on Taxation, changes to the tax code would, on net, result in a little more than $1.1 trillion less being paid in individual taxes over the next 10 years.
“Taxpayers care about the bottom line of how much they owe, not how much the beneficial provisions alone help them, ignoring those provisions that raise their taxes,” Eric Toder, co-director of the Tax Policy Center, wrote in an email.
Overall, the tax plan will reduce taxes for most people in the first eight years. The Tax Policy Center analyzed the tax bill and concluded that most taxpayers at all income levels would get a tax cut in the years 2018 through 2025. Some of the individual tax benefits would expire and as a result, by 2027 more than half of taxpayers would pay higher taxes.
In general, higher-income households receive larger average tax cuts as a percentage of after-tax income, and the largest cuts as a share of income would go to taxpayers in the 95th to 99th percentiles of the income distribution.
The Joint Committee on Taxation estimates the tax law will result in $1.456 trillion less paid in individual, business and international taxes to the U.S. government over the next 10 years.