Trump Tax Plan To Benefit "Top 1%" Most, Cost $2.4 Trillion, Middle Class To Pay More Taxes

Based on what we already know about the proposed Trump tax reform, which can be summarized as follows:

  • collapse the seven individual income tax rates to three (12, 25, and 35 percent),
  • increase the standard deduction,
  • eliminate personal exemptions,
  • increase the child tax credit,
  • eliminate most itemized deductions,
  • repeal the individual and corporate alternative minimum taxes,
  • repeal the estate tax,
  • reduce the corporate tax rate from 35 to 20 percent, tax pass-through business income at a top rate of 25 percent,
  • allow businesses to fully expense investment in equipment and machinery for at least five years,
  • adopt a territorial tax system that would exempt the foreign earnings of US corporations from US tax

... moments ago the Tax Policy Center released its analysis of what the practical impacts of the Trump tax plan will be on the broader population. Below we present the key findings.

The tax plan will cost $2.4 trillion over the first decade and $3.2 trillion over the second dacade, on a static basis

  • The proposal would reduce federal revenues by $2.4 trillion over the first ten years and $3.2 in the second decade. This means that absent a matched deduction in spending, US deficit and debt will increase by a similar amount. This is a problem as a Senate GOP budget resolution unveiled on Friday only allows for adding $1.5 trillion to the debt, implying a revenue shortfall of just under $1 trillion.
    • The business income tax provisions—including those affecting corporations and pass-through businesses—would reduce revenues by $2.6 trillion over the first ten years. Elimination of estate and gift taxes would lose another $240 billion. The individual income tax provisions (excluding those related to business income) would increase revenues by about $470 billion over the same period.

While many Americans will benefit, the biggest gains will go to the 1%, whose after-tax income would increase by over 8%.

  • In 2018, the average tax bill for all income groups would decline: taxpayers in the bottom 95 percent of the income distribution would see average after-tax incomes increase between 0.5 and 1.2%. However, and where the Democrats will have a field day, taxpayers in the top 1 percent (incomes above $730,000), would receive about 50 percent of the total tax benefit; their after-tax income would increase an average of 8.5 percent.
  • Between 2018 and 2027, the average tax cut as a share of after-tax income would fall for all income groups other than the top 1 percent. In 2027, taxpayers between the 80th and 95th percentiles of income (between about $150,000 and $300,000) would experience a slight tax increase on average.

The problem is that at the same time, taxes for substantial portion of taxpayers will go up:

  • In 2018, about 12% of taxpayers would face a tax increase of roughly $1,800 on average. Where it gets worse is that many of those who form the backbone of the upper-middle class, or more than a third of taxpayers making between about $150,000 and $300,000, will pay more, mainly because most itemized deductions would be repealed.

Fast forward to 2027, when the overall average tax cut would be smaller than in 2018, increasing after-tax incomes 1.7 percent. Taxpayer groups in the bottom 80 percent of the income distribution—those making less than about $150,000—would receive average tax cuts of 0.5 percent or less of after-tax income. However, taxpayers making between about $150,000 and $300,000 would on average pay about $800 more in taxes than under current law. And the one item which Democrats will love: about 80% of the total benefit would accrue to taxpayers in the top 1 percent, whose after-tax income would increase 8.7 percent.

It gets worse: by 2027, taxes would rise for roughly one-quarter of taxpayers, including nearly 30 percent of those with incomes between about $50,000 and $150,000 and 60 percent of those making between about $150,000 and $300,000.

According to the Tax Policy Center, the number of taxpayers with a tax increase rises over time. This is because the plan would replace personal exemptions, which are indexed for inflation, with additional credits for children and non-child dependents that are not indexed for inflation. In addition, indexing tax brackets and other parameters to the slower-growing chained Consumer Price Index means that over time more income is subject to tax at higher rates.

Finally, there is of course, the repeal of the state and local tax deduction, a move which is expected to be widely hated by homeowners across the US, but as the chart below shows, by democrat states far more than republican states.

As BofA writes, blue states with high state and local taxes will be the most adversely impacted from the loss of this deduction. Thus, opposition in the Senate will mainly come from Democrats, while Republicans will mostly be on the same page. But, the situation should be more contentious in the House. Data from the Tax Policy Center reveals that 26 of the top 50 districts in terms of SALT deduction usage had a Republican representative. Republicans will likely face more internal pushback from these members. Ultimately, a House bill would fail if two dozen Republicans (and every Democrat) were opposed.

More in the full report below (link):

Comments

Bobrsta Sep 30, 2017 6:37 PM Permalink

"The tax plan will cost $2.4 trillion over the first decade and $3.2 trillion over the second dacade, on a static basis" - tax cuts (as in, the people that earn get to keep more of it) stimulate the economy, and this sentence is idiotic even as it makes note if its own erroneous assumption.Corporations should not be paying taxes. All taxes should be paid at the level of the individual. All corporate taxes are rolled into the cost of the product sold, so the consumer ends up paying it anyway. Might as well be upfront about it.

Bartholomew Sep 30, 2017 2:29 PM Permalink

Gary Cohn wrote this crap up .... I'm under 150 k and my taxes will increase due to living with a state tax and extremely high medical bills.. I'll be at the same tax rate.. this is total Cohn garbage..

Lazane Sep 30, 2017 2:25 PM Permalink

Paying taxes to a Federal Gooberment that holds the power to electronically print however much money that they need to operate the gooberment is about as foolish as it gets.We need a middle class income tax revolt now in order to restore order and to free the debt slaves of America

Rjcrem44 Sep 30, 2017 1:28 PM Permalink

A middle class family of 4 loses $16,400 of personal deductions under this new tax plan and gets a higher standard deduction of $12,400 as a replacement while losing their property tax dedcution which in most large cities Blue or Red is probably like $6 to $12K more of standard deductions. And how do the new tax rates work? Are they tired as they are now where only your marginal income over a certain bracket gets the higher rate or does all your income gets taxed at that new rate.   This is a big net loser for most of the middle class who have kids and live in a house.  But Gary Cohn only thinks it's a loser for a vew outliers.  I'm calling BS on that. 

StreetObserver Sep 30, 2017 1:14 PM Permalink

If corporations are "people" with all the rights of people, with all the constitutional protections of people, then why don't corporations pay the personal income tax?Conversely, why can't people write off their debt interest the way corporations do, declare bankruptcy, to and including student loans, write off personal ads to find a girlfriend the way corporations write off advertising?

Harry Paranockus Sep 30, 2017 12:50 PM Permalink

"The tax plan will cost $2.4 trillion over the first decade and $3.2 trillion over the second dacade, on a static basis." Shouldn't that read..."The tax plan will SAVE taxpayers $2.4 trillion over the first decade"? It isn't COSTING the goverrnment anything.

PitBullsRule NYC_Rocks Oct 1, 2017 12:05 AM Permalink

You deplorables are going to have a real tough time blaming this on us liberals.  This was 100% done by your boy Donny.  We had absolutely nothing to do with this.  And the funny thing is, we're all getting screwed the same.  But keep trying, you might be able to convince yourselves, anyway.  SOMEBODY has to believe in your cause.  Even though, it was obviously lost months ago.

In reply to by NYC_Rocks

MoreFreedom Sep 30, 2017 10:25 AM Permalink

Given this is an analysis by the Brookings Institution you have to take it with a grain of salt, because it hasn't been analyzed by anyone else.  It's got a liberal "tax cut costs" government viewpoint rather than "tax savings" individual viewpoint.   Then on one hand it claims the rich get most of the benefits, while complaining about the tax increases on people making over $150,000 per year.  That's hardly the "backbone of the middle class" except unless your the middle class in DC, as according to https://en.wikipedia.org/wiki/Household_income_in_the_United_States people with that income are in the top 12% of income earners.And consider the irony of Democrats complaing about losing the state and local tax deductions, which unless you own a home, you are unlikely to deduct anyway because they won't exceed the standard deduction, and which only matter to the rich.  A deduction which only benefits rich people in high tax Democrat states, at the expense of everyone else.

overmedicatedu… Sep 30, 2017 10:13 AM Permalink

just remember the " get out of jail card"..bk the FED, end the FRN..all debts wiped off .gov books that the FED and it's banks took on..treasury resumes printing of "us notes"..legal tender for all DEBTS, public and private..that is the end game here, and the banksters are trying to avoid it at all costs..the pols know they have that "TRUMP" card..funny that so many think this 20 trillion debt is real..as real as the paper the fed prints on..LOL

Ajax-1 Sep 30, 2017 10:10 AM Permalink

Big government statist politicians keep telling us that deficit spending doesn't matter. Then why does the government need to tax anyone? They can just print it, right? When I was in college, I laid a trap for my economics professor, for which he could not make a coherent arguement for rebuttle. At that point, I knew Keynesian economics was a lie. 

Ajax-1 Sep 30, 2017 9:58 AM Permalink

THE TAX POLICY CENTER IS AN EXTENTION OF THE DEMOCRAT PARTY. THEY ARE NOT TO BE TRUSTED IF YOU WANT A FAIR UNBIASED EXAMINATION OF THE FACTS. I PRIDE MYSELF IN GOING TO ZERO HEDGE FOR UNVARNISHED TRUTH, BUT THIS KIND OF SLOPPY REPORTING PISSES ME OFF. 

Expat Ajax-1 Sep 30, 2017 12:21 PM Permalink

Wow.  All caps.  I guess you are very, very, very upset.  Do you need some quiet time alone?  A cup of soothing herbal tea?If you are coming to Zh for unvarnished truth, you are dipping your cup in a sludge-filled well.  Unless of course you would like to learn that Twitter shut down Hop Hicks's account because they are liberal scumbags.  Or that 1.2 billion Africans are shortly going to be invading Europe.Now that you are calmer, perhaps you would like to explain his tax bill to us?  As as I can see, it raises taxes on the middle class and poor and lowers taxes on the rich.  It will probably raise the deficit.  And there is no proof (theoretical or empirical) that lower taxes on anyone increases economic activity.I understand that you assholes love Trump.  I don't understand why, but I understand the blind love.  You believe he loves you.  You believe he even knows you exist.  Fine. But when you start claiming that his own statements or policies are lies put out by CNN or the communist party, you look silly.  Trump is a dickhead who cares only about Trump. That means his tax plan will reduce his taxes.  Look at his treatment of S corps in his tax plan; he owns over 200 S Corps!  AMT?  That cost him 33 million in 2005.Oh, I see. All you Trumpeteers are also billionaires.  Caryy on then.

In reply to by Ajax-1

whosyerdaddy Expat Oct 1, 2017 11:19 AM Permalink

"there is no proof ( theoretical or empirical) that lower taxes on anyone increases economic activity". REALLY? Even ultra-liberal Samuelson would violently disagree with that. Friedman, Hayek, and ANY classical economist would tear your argument to ribbons. It is simple arithmetic. A dollar taxed is a dollar unspent in the private economy. For all we know those dollars are burnt at Black Masses at midnight on Capitol Hill. Argument by unsupported ASSertion fails when its primary tenet is so baldly RIDICULOUS. Before you go freakily ad hominem, I voted for Trump with almost no illusions. Hillary WAS THAT BAD. I am amazed she survived the campaign hell she couldn't even stand up.

In reply to by Expat

PitBullsRule Expat Oct 1, 2017 12:17 AM Permalink

I'll tell you why they love Trump.Trump is not as dumb as everyone gives him credit for.  He may be partially insane, but he is extremely smart in some ways.  Trump has the ability to figure out what people want to hear, and tell it to them with the utmost in confidence, even though he knows its a bald face lie.  Trump is so good at lying, its hard to know if even he knows its a lie.  Trump zeroed in on what was irritating the hell out of the average white guy, and he proposed a solution to it.  Drive around any large city, and what do you see.  Graffitti, looks like shit.  Whats the solution?  Build a wall.The brilliance of that cannot be understated, its so simple, so effective, and yet none of those other assholes thought of it.Trump is no dummy, he may be leading us down the path to hell, but he is getting exactly what he wants.

In reply to by Expat

Lostinfortwalton Sep 30, 2017 9:47 AM Permalink

Monthly tax receipts by the Treasury are making month-to month highs. Employment is increasing and even the long-term unemployed are finding jobs. There is NO NEED to screw with the tax system right now. Cut spending, especially all the Middle East military programs and many of the other insane defense and out-of-control social programs, and run a monthly surplus for a change.

el buitre Sep 30, 2017 9:34 AM Permalink

I wonder if this tax plan factors in the upcoming loss of the USD as the world's reserve currency?  That all the "people gold" has been stolen by the banksters twice - the first time in 1934? But Goldman Sucks'  Munchkin just told us that "gold is safe." Lol - all the stackers on ZH know that gold is safe, and that the former people's gold is now safely stored in Asian vaults.   I wonder what will happen when the rest of the planet won't permit deadbeat Exceptionalstan to exchange $600 BILLION in electrons  every year for real stuff like computers and crude oil, but demand real stuff in return?  Deck chairs meet the Titanic.

NoBillsOfCredit Sep 30, 2017 9:01 AM Permalink

All of this talk is like moving around the deck chairs on the Titanic. The Federal Reserve Note money system is a Ponzi scheme and is blowing itself up based upon compounding interest. It cannot be stopped unless the banks are no longer allowed to create debt-based money and the government creates debt free money, like United States Notes, to pay off the debt. Go Bitcoin and Litecoin!

NuYawkFrankie Sep 30, 2017 8:55 AM Permalink

Forget about the 'kick in the teeth' that this "tax reform" administers to the 'working stiffs' - we all know by now that Trump knows which side his bagel is buttered on - but rather, where EXACTLY is there a provison for an 'Income Tax' in The Constitution?

And where EXACTLY does it state the the main beneficiary of that tax should be the Warfare Establishment - especially when that "Establishment" has a peculiar habit of "losing" $TRILLIONS of previously alloted tax-payer largesse while, at the same time, waging contrived wars -engineered by a domestic 5th Column - on behalf of a foreign entity?

Faeriedust NoBillsOfCredit Sep 30, 2017 9:57 AM Permalink

The idea is to steal from the rich to give to the poor, thus evening out the inequities of imperfect economic factors which favor certain persons and locations above others.  It need not and should not be a perfect evening-up, as  room must be left for personal effort, endeavor, and genius,  not to mention that perfection in government, as in all other things in this imperfect mortal world, is impossible.  But stealing from the already-poor to give to the already-rich recreates the massive inequities of the Baroque period which led to our Revolution (and that of France).  It is unjust, and with gross injustice comes contempt, division, and dissolution of the State.  No nation can long endure lacking either just law or ferocious repression, and ferocious repression likewise breeds resistance.The Trump plan, in other words, is a guarantee of civil war in less than 20 years after its enactment.  Now, that's all well and good if your goal is to immanentize the eschaton.  I'm okay with that.  The oaks are dropping bushels of acorns, and I'm out to pick them.

In reply to by NoBillsOfCredit

Occams_Razor_Trader Sep 30, 2017 8:18 AM Permalink

OK Follow along. 39.7% - 35% = 4.7%If you make 5 million dollars (assuming zero credits and deuctions) you yearly tax liability reduces from$1,985,000 to $1,750,000 Saving you $235,000 shmackeroos!But if you make $35,000 per year.your tax rate reduces from 15% to 12%- your liability reduces from$4,200 to $3,500- you only save 700 dollars.So using liberal fallcy thought process- the rich get richer- He saves 235,000 and I ONLY SAVED 700!!Damn rich asses!   

Faeriedust Occams_Razor_Trader Sep 30, 2017 10:15 AM Permalink

Wrong figures.  As I make about $35K I worked it out under several assumptions based on the checklist.  Total savings comes out to maybe $450.  If I'm lucky.You are completely forgetting the effect of losing the Personal Exemption, not to mention that they have yet to release the actual income levels for each tax rate.  Under last year's rules, I exclude about $6K as a childless single payer, pay 10% on the next 15K, and pay 25% on the last 14K for a total of 5K.  Hypothetically under the proposed system, I would exclude 12K and pay 12% on the next 10K, then 25% on the last 13K for a total  of $4450.  At a guess, since they haven't given out the actual break lines.  But whereas the 6K I exclude this year is inflation indexed and would increase steadily for as long as I work, the 10K exclusion would be permanent and would never increase, even as inflation raises my salary and my taxes year after year.  It's a Trojan Horse, and I don't like it.Meanwhile my Little Brother, who has voted a straight Republican ticket all his life, lies in that 150K-300K bracket where he is 80% likely to lose money to higher taxes.  And as a sole earner with a wife and two kids to support and some very intricate business dealings, he's going to feel that loss a lot more than I would.

In reply to by Occams_Razor_Trader