Deputy Director, Federal Tax Policy
The House- and Senate-passed Republican tax bills would directly hurt millions of low- and middle-income families by raising their taxes, delivering token or no Child Tax Credit increases, and (in the Senate’s case) leaving millions more uninsured. But that may be just the start of the harm. Paying for their $1.5 trillion in tax cuts that go overwhelmingly to the wealthy and profitable corporations could leave most low- and middle-income families worse off, a new Tax Policy Center (TPC) analysis shows:
If you consider plausible ways of financing either the House or the Senate bill, most low- and middle-income households would eventually end up worse off than if the bill did not become law. In other words, they would lose more from inevitable future spending cuts or tax hikes necessary to eventually offset the costs of the tax bill than they would gain from the tax cuts themselves.
Take the Senate bill. In 2019, it would deliver tax cuts of 1.8 percent of after-tax income ($28,430) to the top 1 percent of households (with incomes above $746,100) while the bottom 60 percent (with incomes below $87,400) would see, on average, a 1 percent increase in after-tax income ($350). And the bill would add $1.45 trillion to deficits over ten years.
If policymakers ultimately pay for the Senate bill with the types of spending cuts that most closely reflect GOP lawmakers’ priorities — the types that they’ve included in their recent budget plans — the bottom 60 percent of households would be net losers, on average, the TPC analysis shows. High-income filers would continue to gain, on net (see chart):
If GOP lawmakers ultimately pay for their 2019 tax cuts this way:
Moreover, these estimates understate the potential harm to low-and moderate-income Americans from the GOP tax bills, for two reasons:
A scenario more regressive than equal-per-household financing would most accurately characterize the policy preferences embedded in recent proposals by the Trump Administration and Congressional Republicans – for example, the Trump Administration’s budget, the budget resolutions passed by the House and Senate, and the House’s passage of deep Medicaid cuts as part of efforts to bring about health care reform. Additionally, several Republicans have indicated that the next step after tax reform is to cut spending in programs such as Medicare and Social Security.
As we’ve explained, the GOP tax bill that House and Senate conferees are finalizing would be step one of a proposed two-step fiscal agenda: enacting costly tax cuts now that are heavily skewed toward wealthy households and profitable corporations, then decrying the enlarged deficits that those tax cuts fuel — and insisting that they necessitate program cuts mainly affecting low- and middle-income families. Republican leaders have chosen to split this agenda into separate pieces of legislation — but by showing the two steps together, the TPC analysis shows starkly what most Americans stand to lose if it is ultimately enacted in full.