The problem, though, is that the benefits of those cuts are not evenly distributed. Earlier this month, the Joint Committee on Taxation (a nonpartisan congressional committee) evaluated the Senate bill and found that most households earning under $75,000 a year would see a tax increase by 2027. New analysis from the Congressional Budget Office released Sunday and reported by The Washington Post’s Heather Long paints an even bleaker picture: Far from a tax cut, the federal government will save money on anyone earning less than $30,000 over the next 10 years.
Here’s the change in revenue the government can expect under the terms of the Senate bill, according to the CBO’s analysis. Red circles indicate that the government will see a revenue increase.
Those red dots — showing a positive shift for the government — are weighted toward lower-income Americans. In other words, while the government will lose money on higher-income Americans, thanks to the tax cuts, there will be a net benefit for the government for those making less than $30,000. Why? Because, as Long explains, the CBO analysis includes changes to the health-care law. The government will spend less on these lower-income Americans as they lose or give up their health-care coverage with the repeal of the Affordable Care Act’s individual mandate. That’s not necessarily money coming out of their pockets, mind you, since it’s largely subsidies for insurance premiums. But the net effect is still the same: The government is making up for tax cuts on the wealthy in part by giving up on health-care subsidies for the poor.
(Long notes two other important caveats. Unlike other aspects of the tax bill — like the corporate tax cut — personal income tax cuts will sunset in 2026 resulting in increases for most making less than $75,000 a year in 2027. Also, most of those earning less than $30,000 a year don’t owe federal income taxes anyway.)
The biggest loss in revenue for the government comes from those making $100,000 to $200,000 a year, a bit less than a fifth of taxpayers. As a percentage of annual income, though, the biggest shifts are for those earning less. The average U.S. household earning less than $10,000 will see the government spending about 5.3 percent less of that amount by 2027. (Put another way, the government will be spending $530 less per household.) By contrast, the government will be returning about 2.2 percent to those with million-dollar incomes by 2019 — giving up about $21,700 per household.
Again, that’s part of the trade-off. Less spending by the government on some things, including health care for low-income Americans, and less revenue in the form of tax cuts for corporations and (often wealthier) taxpayers.
It’s worth noting one detail in the CBO analysis. The amount that the government will save by not subsidizing health-care costs for those earning less than $40,000 between now and 2025 is about $94.4 billion. Over that period, the government will be giving up an almost equivalent amount — about $91.7 billion — in tax cuts to those making at least $1 million a year.
The hope is that those cuts to the millionaires will spur even greater benefits for poor Americans. If the bill passes, we’ll see whether they do.