Trump Plan Delivers Massive Tax Cuts To The 1% And Sharp Kick To The Upper Middle Class
Corporations, business owners and the 1% are the big winners. Highly paid employees and the nation’s fiscal health are the big losers. Those are the most striking conclusions that can be drawn from a new analysis of the “Unified Framework for Fixing Our Broken Tax Code” (a.ka. the Big 6 plan) which the Trump Administration and key Republican Congressional leaders released earlier this week.
The analysis, issued today by the Tax Policy Center (a joint venture of the Urban Institute & Brookings Institution) projects that over the next decade the Trump/GOP plan would actually increase taxes on non-business individual income by $470 billion, while reducing taxes on business income by $2.6 trillion, and federal receipts from estate and gift taxes by $200 billion.
While some details remain to be filled in, the Trump/GOP framework would reduce the top corporate tax rate from 35% to 20% and the top rate on “pass through” business income reported and taxed on individual returns from 39.6% to 25%. Meanwhile, the top rate on non-business individual income (such as wages and interest) would drop to 35%; the standard deduction would be increased to $12,000 for individual filers and $24,000 for married couples; personal exemptions and many itemized deductions would be eliminated; and the $1,000 child tax credit would be increased by an as yet unspecified amount. (The TPC assumed it would be $500.) At the same time, the estate tax, which now only applies to estates of more than $5.5 million per decedent (or $11 million per couple) would be entirely repealed.
President Donald Trump has promoted the Big 6 plan as a middle class tax cut and has even insisted that the wealthy won’t benefit. “It’s not good for me. Believe me,’’ the billionaire President said as he pitched the framework in Indiana on Wednesday. But TPC’s analysis shows the absurdity of such claims.
In 2018, all income groups (although not all families) would get at least a small tax cut, with the bottom 95% seeing an average 1.2% increase in their after tax income, compared to a hefty 8.5% increase for the top 1% (defined by TPC as those with expanded cash income of $732,800 or more).
In dollar terms, 53% of the cut would go to the top 1% and 30% to the top 0.1% (those with expanded cash income of $3.4 million or more). Put another way, the top 1% would see an average $129,030 tax cut and the top 0.1% would save an average of $722,510, while those in the middle quintile would save an average of $660 per family.
Meanwhile, 12% of taxpayers—and more than a third of those making between $150,000 and $300,000 ---would pay more in 2018, in large part because certain itemized deductions, including for state and local taxes, would be eliminated. (That deduction is a big deal for residents of highly taxed Democratic leaning states like California, New York and New Jersey. But eliminating it could face resistance from some GOP House members too; according to TPC co-founder Len Burman, nearly half of the 20 House districts where the highest percentage of residents claim this deduction have Republican representatives in Congress.)
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