The tax bill Senate Republicans are championing would give large tax cuts to millionaires while raising taxes on American families earning $10,000 to $75,000 over the next decade, according to an analysis released Thursday by the Joint Committee on Taxation, Congress’ official nonpartisan analysts.President Trump and Republican lawmakers have been heralding their bill as a win for hard-working Americans, but the JCT report casts serious doubt on that claim. Tax hikes for households earning $10,000 to $30,000 would start in 2021 and grow sharply from there. By the year 2027, Americans earning $30,000 to $75,000 a year would also be forced to pay more in taxes even though people earning over $100,000 continue to get substantial tax cuts.
Everyone always knew Republicans were going to cut taxes for the wealthy. They’re Republicans; that’s what they do. But it’s a genuine surprise to see them raising taxes on people with more modest incomes. Why isn’t this being angrily decried by all those conservatives who believe that tax increases are a crime against humanity? Could it possibly be that they don’t really care about the middle class as much as they say? Was the whole point of this exercise to cut taxes on corporations and the wealthy, and if regular people have to pay more so those at the top can pay less, then that’s fine with them? Say it isn’t so!
Now keep in mind, these numbers are averages, which means that on average, those earning less than $75,000 will see their taxes go up. Since both bills are such complex hodgepodges of provisions, whether you in particular will see your taxes go up or down depends on your particular situation. That’s one of the reasons you should be on your guard when people like House Speaker Paul Ryan start talking about how great a “typical family” will make out; chances are their numbers rest on questionable assumptions to start with, and only apply to some lucky people.
While this JCT document doesn’t say exactly how many people will see their taxes rise, other analyses give us a hint. For instance, the Institute on Taxation and Economic Policy estimates that under the Senate plan, 19 million households will see a tax increase in 2019, and more than 23 million will get a tax hike by 2027.
The numbers of people getting a tax hike under the House bill are even higher, because it’s more aggressive about eliminating deductions. But the Senate bill also eliminates the Affordable Care Act’s individual mandate, which Republicans will almost certainly include in the final bill, because they need the savings it creates in order to pay for the corporate rate cut.
Who will be hurt most by the elimination of the mandate? The Congressional Budget Office estimates that there will be 13 million fewer Americans with health insurance, and an increase in premiums of 10 percent per year on the individual market over what would have happened without this change. The people hit the hardest will be those who don’t realize they can still get free Medicaid or low-cost coverage with subsidies (and end up uninsured as a result), and those whose incomes are just too high to qualify for subsidies. Those in the latter category are the middle class and upper-middle class.
And just look at the deductions that might be eliminated, depending on how the final bill comes out. Deductions for things such as medical expenses, and state and local taxes, and student loan interest, and grad school scholarships. There are certainly wealthy people who use those deductions, but the people they really matter to are those in the middle class.
Keep this in mind, too: The way the Senate bill makes its numbers add up is by letting many of the cuts disappear in 2025. But you know what doesn’t disappear? The corporate rate cut. That’s permanent. CEOs aren’t even bothering to pretend that they’ll take the tax windfall they get and use it to raise wages: After all, they’re already making near-record profits, so it’s not as though they’re just waiting for a cash infusion to bestow their largesse on the working man. No, the corporate cut is going to go right back to the wealthy, in the form of stock buybacks and dividends.
Finally, it’s important to understand that the tax cut is just one phase of a larger project Republicans have been dreaming of for years. Once this bill passes, they’ll say that we face enormous deficits (made far worse by their tax cut, of course), and therefore we have no choice but to slash away at the safety net. As John Harwood points out today, they’re already preparing to take aim at programs such as Medicaid and Social Security disability, whose largest group of recipients are working-class whites.
To be sure, Trump’s most ardent supporters won’t care. As my friend Thomas Schaller, the political scientist, often observes, for many Trump voters, the election victory was itself the most important deliverable, the proof that their voices had been heard — not to mention a triumphal punch in the face to foreigners and minorities and political correctness. They’re less concerned about what happens afterward, which gives Trump and congressional Republicans the ability to take their money and give it to those who need it least.
That’s the thing about a con. It works best when the marks are only too happy to let you con them.