Even though President Trump and Republicans in Congress are spinning their tax cuts as a boon for the middle class, it’s the complete opposite.
The bill is the Trump administration’s last chance to secure its first major legislative accomplishment before the end of 2017, after Republicans narrowly failed to repeal the Affordable Care Act. The plan would reduce the number of tax brackets, cut corporate taxes from 35 percent to 20 percent, and preserve a number of tax breaks most often used by the very rich while simultaneously eliminating taxes typically paid by only very rich people, like the Alternative Minimum Tax and the Estate Tax.
In order to cover the staggering $1.5 trillion cost of the Trump plan, the proposal would have originally eliminated the state and local property tax deduction that many middle-class families utilize to lower their taxes, while allowing the deduction to remain in place for corporations. However, fearing midterm election blowback, Republicans have since allowed the deduction to remain while still attempting to eliminate other itemized deductions.
But an analysis from the non-partisan Tax Policy Center (by the Urban Institute and the Brookings Institution) shows that in its current form, the Republican plan would increase tax burdens across the board, with middle-class families taking the biggest hit both immediately and over a ten-year period. Between 2018 and 2027, middle-class households’ taxes would increase by roughly 15 percent:
— Chad Bolt (@chadderr) October 30, 2017
While it’s technically true that lower and middle-class households would see a negligible dollar amount of an increase in their after-tax income, the vast bulk of the cuts would go to households in the top 1 percent of earners. The New York Times reported that the 175,000 richest families in the country would get an average annual tax cut of approximately $700,000. And because of the bill’s failure to truly account for inflation, poorer households would end up paying more over time despite the simplification of the tax code.
The Times also pointed out that the tax cuts would drastically increase the federal deficit, prompting further cuts to social safety net programs that low-income Americans depend on, meaning less money in their pockets over time:
The Reagan and George W. Bush tax cuts may have at first seemed to help the middle class and poor. But the deficits led to later cuts in education, medical research, transportation and anti-poverty programs that almost surely erased the benefits of a modest tax cut. Already, today’s congressional leaders are talking about sizable cuts to Medicare and Medicaid.
Over the following decade, the Republican budget would pay for tax cuts for the rich primarily by slashing Medicaid to the tune of $1 trillion, and Medicare by $500 billion. That amounts to approximately $150 billion year in cuts to healthcare programs meant for low-income families with children and elderly Americans living on fixed incomes, while the wealthiest Americans enjoy a reduction in their taxes amounting to a new 50-foot yacht every year.
Both Treasury Secretary Steven Mnuchin and National Economic Council Director Gary Cohn have been working with Congressional leaders like House Speaker Paul Ryan and Senate Majority Leader Mitch McConnell on the finer details of the bill, along with Rep. Kevin Brady (R-Texas) and Sen. Orrin Hatch (R-Utah), who are the chairmen of each chamber’s respective taxation committees. The legislation itself is expected to be unveiled by mid-week.
Carl Gibson is the publisher of Grit Post. His work has previously appeared in The Guardian, Al Jazeera-America, NPR, The Washington Post, and others. Follow him on Twitter @crgibs or email him at carl AT gritpost DOT com.