29 September 17 PM
GOP Creates Illusion of Middle-Class Benefits in Their Tax Plan
Hunter Blair, The Hill
Blair writes: "For months, Republicans have been touting their forthcoming tax plan on the basis that it will help the middle class. Wednesday, we finally got a look at their plan. What's not surprising is that the vast bulk of tax cuts will go to the richest households. What's actually a bit surprising is just how little low- or middle-income families will get."
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Speaker of the House Paul Ryan. (photo: Greg Nash/Getty)
or months, Republicans have been touting their forthcoming tax plan on the basis that it will help the middle class. Wednesday, we finally got a look at their plan. What’s not surprising is that the vast bulk of tax cuts will go to the richest households. What’s actually a bit surprising is just how little low- or middle-income families will get.
The tax giveaways to the rich in the plan released yesterday are clear. It lowers the top tax rate, which is paid only by the richest 0.5 percent of households. It slashes the rate corporations have to pay from 35 to 20 percent.
It provides a huge new loophole for owners of hedge funds, law firms and hugely lucrative businesses — hiding behind rhetoric about helping “small businesses.” It makes the egregious loophole that big multinational firms use to defer paying taxes on profits booked overseas permanent.
Are there any crumbs for the middle class? Hardly. The most incredible part is how hard the plan tries to hide just how stingy it is to the broad middle class.
The plan includes a much-touted doubling of the standard deduction. If it stopped there, it would deliver a straightforward tax cut to the broad middle class. Instead, the plan also ends personal exemptions, which by itself largely neutralizes any potential tax cut for most middle-class families. On top of this, the plan raises the lowest tax bracket rate from 10 to 12 percent.
The plan also increases the Child Tax Credit. By itself, again, this would genuinely constitute a middle-class tax cut. But the authors couple it with the elimination of the personal exemption for dependents, which neutralizes this cut for most middle-class families.
On average, for households in the broad middle class, these changes will probably end up as a wash on net. The tax increase and ending of personal exemptions claws back most of what the doubled standard deduction would’ve given low- and moderate-income households, and the increased Child Tax Credit is clawed back with the elimination of personal exemptions for dependents.
But depending on the details, which the Republican plan is sorely lacking, a non-trivial number of middle-class households could be looking at a tax increase.
Admittedly, without the details left out of today’s plan, it’s hard to say exactly which low- and middle-income families are likely to be immediately harmed by the Republican tax plan. But their previous tax plans do give us enough to make some educated guesses.
If the parameters of those older plans hold, then millions of low- and middle-income families will likely see their taxes go up.
Those previous versions, which look almost exactly the same as this version, albeit with a few more details specified, also got rid of personal exemptions while doubling the standard deduction. But they also got rid of “head of household” filing.
At the end of the day, the interactions between these tax changes in Trump’s campaign plan resulted in about 20 percent of households, including more than half of single parents, paying more in taxes.
Households that currently itemize deductions rather than taking the standard deduction are also likely to see their taxes go up. Currently, taxpayers take personal exemptions on top of either the standard deduction or their personal itemized deductions.
But the Republican plan only offsets the elimination of personal exemptions by increasing the standard deduction. This means that households that itemize (and hence do not use the standard deduction) will simply lose their personal exemptions with nothing to offset it.
Will middle-class families get anything in return for risking a tax increase? No, and the programs they depend on are likely to find themselves on the chopping block in coming years as the deficits that result from the Trump plan are used to justify damaging cuts to Social Security, Medicare, Medicaid and the Affordable Care Act.
Today’s plan came out as many of us expected all along: a deficit-financed tax cut for the rich that sets up later budget debates where Republicans will claim that deficits demand we savage the social insurance and public investment that the middle class relies on.
We know from past regressive tax cuts that no flood of economic growth will cushion any of these blows. Today’s plan should put the lie to any remaining claims the Trump administration has to genuinely care about the plight of low- and moderate-income households more than the rich. It’s all on paper now.
http://readersupportednews.org/opinion2/277-75/46040-gop-creates-illusion-of-middle-class-benefits-in-their-tax-plan
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