There are two governmental organizations that have conducted nonpartisan analyses of the anticipated effects of Republican legislation aimed at overhauling the tax system. There’s the Joint Committee on Taxation, established in 1926 with congressional oversight to prepare revenue estimates on proposals related to taxation. There’s also the Congressional Budget Office, which produces independent analysis of the budgetary effects of legislation.
Recently released analyses from both groups come to the same conclusion. Over both the short- and long-term, the benefits of the Republican proposal is weighted to wealthier Americans.
One aspect of the JCT’s analysis included an estimate of how many households in various income ranges would see increases or decreases in the amount of tax paid. The vast majority of those making under $10,000 a year — 96 percent — would see a minimal change (no more than $100 in either direction) in their tax bill by 2019. By contrast, 91 percent of households making between $500,000 and $1 million a year would see a cut of at least $500.
It’s worth noting that there aren’t that many households making more than $500,000 a year, relatively speaking. But scaling the figures to the number of households in each group, the same broad effect can be seen. There are about 18.4 million households that earn under $10,000 a year which will see little change in their tax bill. There are about 24.5 million households that earn $100,000 to $200,000 a year which will see a savings of at least $500. The 18 million households in the $50,000 to $75,000 range will save at least $500. About 3 million in that group won’t see much change.
That’s all by 2019. By 2027, the tax cuts will have phased out, as written in the Republican bill. At that point, most lower-income Americans will see little change in their tax bills. Most higher-income Americans will still see a benefit.
By 2027, about 40 percent of households earning between $200,000 and $500,000 will save at least $500 on their tax bills. More than half of those earning $500,000 or more will. The majority of those earning less than $100,000 a year will see little change in their tax bills — but for those that do see a significant change, the change will be an increase in their tax bills. A third of millionaires will be paying at least $500 more a year — but 6 in 10 of that group will be paying at least $500 less. A fifth of those earning between $50,000 and $75,000 will be paying at least $100 more in taxes — and half as many will be paying at least $100 less.
In terms of households, a much higher percentage of those earning more than $75,000 a year will see substantial tax savings in both 2019 and 2027. More wealthier households will see more substantial tax costs in 2019 — but that reverses by 2027.
Overlaying the change in 2027 onto the change in 2019, the pattern is clear: The wealthy will continue to see bigger savings while less wealthy Americans will see their tax bills largely revert to where they are now.
Another way to look at the tax proposals is how it affects federal revenue. Overall, the CBO estimates that the tax proposal will increase the federal budget deficit by $1.4 trillion over the next 10 years, a function of decreased income from taxes. Again, in 10 years’ time, the distribution of those effects will be uneven. Most of the decrease in revenue over the next decade is a function of cutting taxes for wealthier Americans, but by 2027, the government will see a slight uptick in revenue from those making under $75,000 as taxes for households in that range increase.
By 2027, the government will be earning about $16.2 billion less from households earning more than $75,000 a year — but will be taking in about $3.4 billion more from households earning less than that.
That’s if we exclude the effects of one part of the Republican proposal: A repeal of the Obamacare individual mandate. The mandate exists to spur people to sign up for health coverage, decreasing the number of uninsured but also adding money to the system to allow it to cover more people who have higher medical costs. Repealing that mandate will mean fewer people are signing up for insurance, which means that the government will spend less money on subsidizing poorer Americans who need coverage.
The effect, then, is that over the short term the federal government will be saving money on poorer Americans, even after cutting their taxes. By 2021, the CBO estimates that federal revenue will be up about $24 billion from households that earn less than $30,000 a year, even as it loses $198 billion thanks to tax cuts on those making more than $75,000 a year.
By 2027, the revenue increase from households earning under $75,000 will be nearly $60 billion, offsetting the loss of about $20 billion due to tax cuts for those making more than $75,000 a year.
The JCT’s analysis is similar. The government will see a net gain from those households making less than $30,000 a year by 2021 of about $6 billion. It will, at the same time, be losing nearly $200 billion thanks to tax cuts on higher-income Americans. By 2027, the government will see an increase in revenue of about $27 billion thanks to lower-income Americans as it sees $16 billion less in revenue from tax cuts on higher-income Americans.
The countervailing argument is that the rich pay more in taxes and, as such, reducing taxes proportionately means reducing taxes on the wealthy more. This is the “paying for beers” argument, made by White House press secretary Sarah Huckabee Sanders last month. That, though, is a decision that the people crafting the legislation are making: keeping corporate tax cuts and other measures benefiting the wealthy indefinitely while other income tax cuts are phased out. The net result, according to nonpartisan government analysis, is a larger benefit for wealthier Americans, over both the short and long term.