The price of tax cuts: 28% could end up paying more as debate starts on GOP overhaul
Some people in every income group would end up paying more tax even while a majority pay less under the sweeping overhaul of the tax code that a House committee began debating Monday, an analysis by the nonpartisan Tax Policy Center found.
Overall, 70% of people would get a tax cut next year averaging $2,000, but 12%Â would pay an average of $1,560 more, the study found.
By 2027, those paying more would grow to 28% of all taxpayers, who would pay an average $1,980 more, while 57% would save $2,400.
Part of the change between next year and 2027 is due to temporary provisions that disappear in five years, such as a new $300 tax credit for taxpayers and spouses and special bonus deductions for business equipment purchases provided in the bill are temporary, the study found.
The tax plan unveiled by House Republican leaders Thursday would reduce the number of tax brackets and lower some tax rates while removing many exemptions and deductions and capping others. It would make the first $24,000 of income tax free for a married couple, for example, but it would also eliminate the estate tax and Alternative Minimum Tax that overwhelmingly are paid by those in upper income groups.
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If all taxpayers were broken into five equally sized groups by income, those at the bottom next year would get a tax cut of $40 on average, followed by $150 for the next group, $700 for the middle group, $1570 for the next group and $4,850 for the top one-fifth, the Tax Policy Center found. The top 1%, those earning more than $307,900, would save $37,340. The top 0.1% earning more than $3.4 million would save $178,540.
But within those groups, there would be winners and losers.
By 2027, some 31% of those earning between $28,100 and $54,700 would pay an average of $690 more in taxes, for example, while another 57% could get a tax cut averaging $360.
For people in the middle income group, making $54,700 to $93,200, about one-third would pay $1,170 more while two-thirds pay $1,080 less.
As the Ways and Means Committee held the first of what are expected to be four days of hearings Monday to get the bill to the House floor by next week, Republican supporters focused on the overall benefits, while Democrats railed about those who would lose out to provide big benefits for those at the top.
“I’m having trouble understanding how a bill that will give back $1,200 to average American families is a problem,” said Rep. Mike Kelly, R-Pa., using an estimate developed by the Republican majority for a family of four making the median income of $59,000.
But Democrats, especially those from Connecticut, New Jersey and New York, complained about changes that would put higher burdens on their states by eliminating the deduction for state income taxes, limiting the property tax deduction to a maximum $10,000 and capping the deduction for mortgage interest by only allowing it on new loans of $500,000 or less.
“Taxes would rise for many of the working class, and fall for the richest Americans,” said Rep. Bill Pascrell, D-N.J.
While the U.S. Chamber of Commerce is pushing to pass the bill, Pascrell noted that the New Jersey Chamber issued a statement saying it could not support the bill.
“While some citizens and businesses in the state would benefit, many more would not,” New Jersey Chamber of Commerce President Thomas Bracken said. “This legislation would make New Jersey less affordable and less competitive, and impede our ability to climb back to an acceptable level of prosperity.”Â
Republicans on the committee said the complexity of the tax code was a reason for passing the bill, and argued cuts in corporate rates would stir economic growth.
“Taxpayers are looking to us to get something done. They’re sick and tired of politics,” said Rep. Jim Renacci, R-Ohio.
The chief of staff to the Joint Committee on Taxation, Thomas Barthold, told the committee the bill would reduce overall revenues by $1.5 trillion over the coming decade.
But Democrats said it would balloon the federal deficit and force cuts in the future to programs such as Social Security and Medicare.