With all eyes on Brett Kavanaugh and rumors of a possible 25th Amendment ouster of President Trump, Republicans in Congress are hoping to pass yet another bill that would drastically cut taxes for the richest Americans.
The Republican-controlled House of Representatives is slated to vote later this month on a new tax bill (dubbed “Tax Reform 2.0”) that would permanently extend the individual tax cuts in last year’s tax bill originally due to expire in 2025. Because of how the cuts were structured, the vast bulk of those tax cuts will go to the wealthiest one percent of income earners.
According to a new paper by the Center on Budget and Policy Priorities (CBPP) — a nonpartisan economic think tank — the permanent extension of individual tax cuts will cost approximately $649 billion over a ten-year period. Americans in the top one percent of tax filers (those making at least $732,800/year in 2018) can expect an average tax cut of $32,650, while the poorest 60 percent of income tax filers (anyone making less than $86,100) would get an average tax cut of just $340.
The CBPP paper notes that while the bulk of the tax cuts would come from making the individual provisions permanent, another significant part of the bill would permanently extend the 20 percent tax deduction for income generated from so-called “pass-through” entities.
This would incentivize wealthier Americans to further game the system by claiming their income through an entity like a limited liability corporation (LLC) with its own tax ID number, rather than claiming it as personal income under their own Social Security number. For example, Kansas University men’s basketball coach Bill Self (who made just shy of $5 million this year alone) legally avoided roughly 90 percent of state taxes by claiming his paychecks through an LLC.
Last year’s tax bill already comes at a cost of roughly $1.5 trillion over ten years, which outgoing House Speaker Paul Ryan (R-Wisconsin) hinting that Republicans wanted to pay for it by slashing federal funding for Medicare. Vox estimated that 83 percent of the benefits outlined in last year’s legislation went to just the top one percent of tax filers.
Logan Espinoza is a freelance contributor specializing in economic issues. He lives in Phoenix, Arizona with his wife and daughter. Contact him at logan DOT espinoza AT yahoo DOT com.