Here is the key takeaway from the new analysis, which is the work of the Tax Policy Center: By 2027, around 50 percent of taxpayers will see a tax hike. The whole purpose of this tax increase is to make it possible for Senate Republicans to pass a tax cut that overwhelmingly benefits the very wealthiest taxpayers — on party lines, without any Democrats.
Using the data from the TPC’s analysis, I’ve created two charts that boil down the story of the Senate tax bill. The first chart details the average tax change for each major income group, by year, if the Senate plan becomes law, in dollars:
This shows that in certain respects, the plan actually gets more regressive over time. The tax cuts for the four lower-income quintiles basically shrivel up and disappear by 2027, with the two lowest quintiles ultimately seeing either a tax hike or no change, while the middle and fourth see the tax cut dwindle away to almost nothing. By contrast, in 2027, the top one percent sees an average tax cut of more than $30,000, and the top 0.1 percent sees an average tax cut of more than $200,000 — more than double what it was in 2019, and a good deal more than it was in 2025.
Why does this happen? Because the Senate plan front-loads the benefits for lower- and middle-income groups. It cuts individual income taxes for all groups and gives lower-income groups various tax preferences, but those things are temporary, and expire after 2025. But three things remain permanent: The individual mandate repeal; a new inflation metric that continues pushing people into higher tax brackets; and the corporate tax rate remains at 20 percent, down from 35 percent.
Because of all these complexities, some people in every income group see a tax hike at each juncture, and some people in every one of them see a tax cut. That’s all reflected in the averages in the chart above, which in the short term tilt toward a cut for all groups. But come 2027, most of the benefits for lower- and middle-income taxpayers vanish, even as the corporate tax cuts continue delivering a massive reduction to the top:
This, too, shows that the plan gets more regressive over time. Large majorities of the middle three quintiles see tax hikes in 2027. Meanwhile, virtually all the people in the top 1 percent and top 0.1 percent see a tax cut. Taken all together, 50 percent of overall taxpaying units see a tax hike; the vast majority of those people are concentrated in the lower quintiles.
Joseph Rosenberg, a senior research associate at TPC, told me that the TPC’s model explains these findings. The TPC’s model assumes that broadly speaking, 80 percent of the benefits of corporate tax cuts go to shareholders and capital, and 20 percent go to labor. That 20 percent figure is why smaller groups of people of more modest incomes continue to get a tax cut in 2027 (the larger numbers who see a tax hike do so because the change in inflation indexing pushes them into higher tax brackets). And it’s also why almost everyone at the very top continues to get a tax cut — a massive one.
“By 2027, all that’s really left is a big corporate tax cut,” Rosenberg told me. “This primarily benefits high-income people — people with a lot of capital income — shareholders, people who have capital gains dividends, and people who have interest income.”
The whole point of the bill
The whole point of zeroing out the tax cuts for lower-income groups, resulting in a tax hike for so many people, is to fund the continued corporate tax cuts, so they don’t add to the deficit in the long run, allowing Republicans to pass the bill via a simple majority vote. Republicans insist that the lower-end tax cuts will be extended later. But this should drive away deficit hawk Republicans such as Jeff Flake, Bob Corker and John McCain, since it amounts to an admission that either taxes will go up on the middle class or the deficit will be blown up later. By the way, another TPC analysis of the House plan finds that the tax cuts won’t produce the necessary explosion of growth to pay for them, so that rationale is also out the window.
Meanwhile, Susan Collins (R-Maine) has come out against the bill’s mandate repeal on the grounds that spiking premiums would cancel out the tax cuts for many lower-income people. But the bill actually hikes taxes for enormous numbers of those same people. How can any of these senators support this bill, given what we know about it now, without rendering their previously stated principles totally hollow?
* JEFF FLAKE STILL HAS ‘CONCERN’ ABOUT TAX BILL: The Republican senator from Arizona expresses his latest concerns in an interview with an Arizona radio station:
“We’ve got to realize we have a $20 trillion debt and a deficit that’s about $600 billion a year, and we can’t do things that are simply going to explode that deficit … I think we desperately need tax reform … It’s been more than 30 years since we’ve had significant tax reform. My concern is that it’s really tax reform and not just tax cuts.”
Trump recently tweeted that “Jeff Flake(y)” will vote no, so I guess we’ll soon find out whether Trump’s childish taunting is enough to get Flake to abandon his stated principles.
* ROY MOORE PUTS ALABAMA GOP IN AN AWFUL BIND: The Washington Examiner reports that Roy Moore’s Senate candidacy has put Alabama Republicans in a no-win situation. As Joel Blankenship, a member of the party’s executive committee, puts it:
“Judge Moore has put the state party in a precarious position that will have long-term ramifications. To remove him would alienate the Christian conservative wing of the party; to keep him will potentially have long-term consequences from women, young people [and] the business community.”
Putting aside how dispiriting it is that removing Moore would alienate Christian conservatives, something tells us that if he wins, Republicans will adjust to the downsides.
* DEMOCRATS HAVE LEVERAGE IN DACA FIGHT: The Hill reports that Democrats want to attach protections for the “dreamers” to the next government funding bill, but Republicans would prefer to kick the dreamer problem to next year, which could lead to a government shutdown:
Although they’re the minority in both chambers, the Democrats will have leverage in December’s spending fight, given the Senate filibuster and the historic struggle of House Republicans to find 218 Republican votes to pass budget bills on their own. … Kicking DACA to 2018 could complicate passage for another reason: if would force Republicans to vote on a divisive issue in an election year.
As the Hill notes, even some Republicans recognize that it would be reprehensible to keep the dreamers in a state of uncertainty into next year, so Democrats must not give on this.
* ‘MUSLIM BAN’ FIASCO IS SCRUTINIZED: The Post reports that the Department of Homeland Security’s inspector general has concluded that the botched “Muslim ban” rollout led federal agents to violate court orders in keeping people off flights. And:
He also alerted them that his findings have become bogged down in a battle with the department over redactions that he said would obscure the true failures of the administration’s handling of the first travel ban.
So we’re not getting the truth about what a disastrous mess Stephen K. Bannon and Stephen Miller made. Let’s not forget that they were the key architects.
* REPUBLICANS CAN’T GET STORY STRAIGHT ON TAXES: A good catch by Paul Krugman: Republicans are offering multiple different excuses for why their tax plan would explode the deficit:
They don’t seem to have settled on a story. [Treasury Secretary Steven] Mnuchin keeps asserting that tax cuts will pay for themselves, going so far as to claim (falsely) that Treasury has released a study showing this. Mick Mulvaney, the budget director, cheerfully acknowledges that they’re using gimmicks to pass a bill that permanently cuts taxes on corporations, and not to worry. Whatever works, it seems.
Mulvaney claims it’s a “gimmick” for individual rate cuts to expire after 10 years to remain in the deficit window — an admission that the plan hikes individual rates later to fund corporate tax cuts.
* SERIOUS REPUBLICANS SHOULD DENOUNCE TAX PLAN NONSENSE: The Post has an excellent editorial pointing out that Mulvaney really gave away the game with his “gimmick” remark:
Senators from whom the public should expect more — such as Susan Collins (R-Maine), Bob Corker (R-Tenn.), Jeff Flake (R-Ariz.), John McCain (R-Ariz.) and Lisa Murkowski (R-Alaska) — should finally denounce this nonsense. … This is a gut-check moment for any senator who has ever claimed to care about the debt. … The GOP tax bill is a charade. In case anyone thought otherwise, Mr. Mulvaney just confirmed it.
And a new Tax Policy Center analysis of the House plan blows up the claim that the GOP tax cuts will pay for themselves, so these senators don’t even have that lie to use as an excuse anymore.
* AND SEXUAL HARASSMENT CHARGES ARE JUST GETTING STARTED: Axios previews a lot more to come:
News organizations are looking into specific congressmen, some with years-old reputations for leering, infidelity and more. Reporters have been asking around about other well-known media figures. We hear one top name is the target of two media investigations. And consider this: The wave has yet to hit the New York corporate suites.
One imagines that this will consume many lawmakers in both parties. Fun times ahead!