First, here’s a rough typology of the lies upon which the sales job for the Republicans’ wasteful, regressive tax cut is based.
- The tax cut won’t help the rich. 1a. It won’t help Trump.
- The tax cut will generate enough growth to pay for itself. 2a. Sec’y Mnuchin’s now going beyond this, claiming that it will raise more revenue than it loses. (Here’s what I think’s going on there.)
- Most of the benefits of the tax cut will go to the middle class.
Lies, lies, lies. And while it’s early days, and much could change, My impression is that a lot of people outside of DC Republicans aren’t buying them. The media and the Twitterverse is especially lit up with lies #1 and #2. In fact, here’s the NYT doing some calculations on lie 1b (“Trump could save more than $1 billion under his new tax plan”; that’s mostly due to eliminating the estate tax).
Also, on #1, see the Tax Policy Center’s take on the benefits to the wealthy:
- The top 1 percent of households (those with incomes above $730,000) would get about 53 percent of the framework’s net tax cuts, or roughly $130,000 a year on average.
- The top 0.1 percent of households (those with incomes above $3.4 million) would get roughly 30 percent of the framework’s net tax cuts, or about $720,000 a year, on average.
This analysis also applies to the reduction in the tax rate (from about 40 to 25 percent) for business pass-through income, which the R’s are trying to sell as helping small businesses. In fact, 86 percent of pass-throughs are already taxed at 25 percent or less. Chuck Marr reports that “79 percent of the benefit of this tax cut would flow to filers with incomes above $1 million. The 400 households with the highest incomes would receive an average tax cut of $5.5 million from this provision alone.”
Re #3, since most of the cuts go to the top, there’s not much left to trickle down to the middle class, but the tax cutters are making a big deal out of how their plan to double the standard deduction (or, to increase the zero tax bracket) will help lower income families. And, no question, some will benefit from that.
But what they don’t talk about is their plan to get rid of personal exemptions, which also lower the tax burden for families, especially those whose deductions currently lead them to itemize (and thus forego the current standard deduction) and numerous members. To determine whether middle-class families get a cut or an increase under the new plan, you must see if the higher standard deduction (plus the proposed expansion in the child tax credit, about which details have yet to be released) is greater than the loss of personal exemptions.
Thankfully, Josh Barro carefully, with caveats for what’s known and what’s not, does the number crunching. His conclusion: “While there are still a lot of details to be filled in, the information we have available suggests the new Republican tax proposal would raise income taxes on many families who make just a bit more than the national average.”
Finally, once you’ve gone through all this muck and taken the requisite shower to clean all that BS out of your pores, here’s yours truly on what actual tax reform might look like. Simply put, the goal is to raise the ample revenue we need to meet the challenges we face, while pushing back on market-driven inequalities.
[I updated some numbers based on TPC’s new estimates; link above.]