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The Media Keep Saying the GOP Tax Bill Is Best for Rich Families. They're Wrong.

December 14, 2017 in Economics

By Chris Edwards

Chris Edwards

There is one thing the mainstream media agrees on about the
Republican tax cuts. The “GOP Plan Evolved into a Windfall
for the Wealthy,” said a Washington Post
headline
. An Associated Press
story discussed
, “How GOP Tax Plans Would Reward Rich
Families.” And a New York Times
editorial called it
, “A Tax-Cut Bill to Make Scrooge
McDuck Proud.”

That narrative is everywhere, and it is false. The GOP’s
tax proposals would give the largest relative cuts to the middle
class, increase subsidies to low-income households, and make the
tax code more progressive. Those are misguided policies, but that
is what Republicans will likely deliver even with some final tweaks
this week.

Let’s look at data on the Senate tax bill from the Tax Policy
Center. In 2019 the middle-income quintile (or one-fifth) of U.S.
households would receive an average tax cut of $840, while the top
quintile would receive $5,420. At first blush, the top group seems
to do better.

The GOP’s tax proposals
would give the largest relative cuts to the middle class, increase
subsidies to low-income households, and make the tax code more
progressive.

However, the top group currently pays far more in income and
estate taxes, so its relative cut would be smaller. The tax cut for
the top quintile would be 8 percent of current taxes, while the cut
for the middle quintile would be a huge 23 percent. The Senate bill
trims the top income tax rate and the rate on small businesses, but
it cuts rates, doubles the standard deduction, and increases child
credits for the middle class.

Let’s look at other TPC data. The Senate bill would give
62 percent of the overall tax cut to the top quintile in 2019. But
that group pays 84 percent of individual income
taxes and 67 percent of all federal taxes. Since the tax cut
percentage for that group is smaller, it would pay a larger share
of overall federal taxes going forward.

What about the middle quintile? It currently pays 10 percent of
all federal taxes, but would receive 13.5 percent of the Senate
bill’s tax cuts in 2019. Thus, middle earners would gain an
extra-large share of the tax cuts.

As for lower-income households, they would receive a subsidy
increase. Currently, the bottom two quintiles of households do not
pay any federal income taxes on net. Yet those groups would receive
substantial tax “cuts,” which would be largely an
increase in refundable tax credits.

The bottom line is that the GOP tax cuts would make the tax code
more “progressive,” which is …read more

Source: OP-EDS

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