Q: How bad is the Republican tax plan that came out this week?

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Q: How bad is the Republican tax plan that came out this week?

A: As expected, it is a huge tax cut for the 1% with pretty small potatoes for everyone else, and tax increases for some. No idea how the Republicans will pay for this - cut Medicare? cut Social Security? There's been a lot of press over the individual tax components, but the $ impact of cutting corporate taxes is huge (see the chart above). The (non-partisan) Tax Policy Center published an analysis of the tax plan– here are some highlights:

  • Cost over the next ten years (loss of government funding) of selected parts of the plan:
    • Eliminate estate and gift taxes: $239 billion
    • Repeal the alternative minimum tax: $440 billion
    • Change income tax brackets (incl. eliminate the top marginal tax bracket): $1.17 trillion
    • Eliminate the state and local tax deduction: -$1.3 trillion (this is an increase in taxes)
  • In 2018: “Taxpayer groups in the bottom 95 percent of the income distribution would see modest tax cuts, averaging 1.2 percent of after-tax income or less. The benefit would be largest for taxpayers in the top 1 percent (those making more than $730,000), who would see their after-tax income increase 8.5 percent.”
  • “By 2027, taxes would rise for roughly one-quarter of taxpayers, including nearly 30 percent of those with incomes between about $50,000 and $150,000 and 60 percent of those making between about $150,000 and $300,000. The number of taxpayers with a tax increase rises over time.”
  • On net, the individual provisions of the plan result in increased taxes over the next ten years of nearly half a trillion dollars (see chart above). This is because some taxpayers, such as many who make $150-300k, but also some with much lower incomes, will have taxes raised by an amount that more than offsets tax cuts to others (mainly the 1%’ers).

Bottom line: This proposal is a huge tax cut for the wealthy, comprised of some changes to individual income tax provisions, and large $ changes to corporate tax provisions.

Stephanie Lee