To hear President Trump and Republican lawmakers say this, his tax reform plan released this week would be to the advantage of the middle class.
In fact, low- and middle-income families may see some tax cuts, but much lower than those at the top of the income scale.
This is according to an initial analysis by the Urban-Brookings Tax Policy Center, a think tank in Washington.
The Tax Policy Center report, published Friday, found that all average income groups would have a tax cut next year, meaning they would have more money after taxes.
But the top 1% (those with total incomes above $ 730,000) would do much better than everyone else. His after-tax income would increase by about $ 130,000 on average, or 8.5%.
The top 0.1%, which earns $ 5 million a year in the north, would do even better. Their after-tax income would increase by 10%.
The lower 95% of households, on the other hand, would have an increase of only 0.5% to 1.2%. It’s true that they have more money in their pocket, but not much.
Here’s a more detailed look at how taxpayers at different income levels could benefit next year.
Lower 20% (up to $ 25,000): A 0.5% increase in after-tax income, or about $ 60 on average
20% average (between $ 48,600 and $ 86,100): A 1.2% increase in after-tax revenue, or $ 660 on average
Top 20% ($ 150,000 or more): A 3.3% increase in after-tax income, or $ 8,470 on average
Over the next decade, the good news would continue for the top 1%. Its average tax cut would be even greater in 2027 than in 2018, although a higher 0.1% would get a smaller tax cut in 10 years than next year.
Most other income groups would also see less of a tax cut in 2027.
Some will have no rest. Taxpayers with total incomes between $ 150,000 and $ 300,000 would actually see their taxes increase by the end of the decade relative to what they pay today.
Despite the average tax cuts, many people will pay more
Of course, these are just averages. Even if an income group receives an average tax cut, that doesn’t mean taxes go down for everyone.
Next year, 12% of taxpayers would have to pay about $ 1,800 more on average under the provisions of the framework, the Fiscal Policy Center estimates. This includes about 13.5% of middle-income taxpayers, who would pay an average of $ 1,000 more.
And more than a third of those earning between $ 150,000 and $ 300,000 will pay about $ 2,880 more on average, mainly because the GOP mark calls for the repeal of most detailed deductions, including the lucrative state and local tax deduction.
By 2027, about a quarter of all applicants would owe more than they do today, including nearly 30% of those earning between $ 50,000 and $ 150,000 and 60% of those earning between $ 150,000 and $ 300,000.
Some warnings to the analysis
The Republican plan released this week is just a framework. The Capitol committees that will draft the tax legislation must fill in crucial details.
Therefore, the analysis of the Center for Fiscal Policies makes a lot of assumptions.
But those assumptions are largely based on details set out in last year’s Republican leadership House “A Better Way” plan and a one-page tax scheme published by the Trump administration in April.
The Tax Policy Center also made its estimates using conventional methods for “scoring” tax proposals. This means it takes into account what economists know about how people respond to changes in tax rules.
But he still did not estimate how the proposals could affect overall economic growth, using a “dynamic scoring” analysis. Researchers at the Tax Policy Center said that, based on similar proposals, they did not expect their dynamic score to show large growth effects.
This is likely to put them at odds with the administration, which has said it hopes tax reform will help the economy grow at least 3% steadily.
CNNMoney (New York) First published on September 29, 2017: 2:48 PM ET
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