Summary of the Latest Analyses by CBO and the Tax Policy Center of the Fiscal Impacts of the Senate GOP’s Federal Tax Measure
The CBO (Congressional Budget Office) estimate is dated November 26, 2017. It finds that the proposal would increase the federal deficit by $1,441 billion over the next ten years. Revenues would be reduced by $1,663 billion and spending by $219 billion.
Of the total, $1.1 trillion would be individual tax relief. Those changes are about $140 to $150 billion annually between 2019 and 2025, then many of them would be sunset so that the corporate tax changes can be made permanent.
The corporate tax changes would cost $668 billion over the decade -- $90 to $110 billion in the first few years, tapering off to $45 to $65 billion annually during the latter part of the decade. These changes are permanent.
There are also changes in the treatment of corporate taxes internationally that would increase federal revenues by $154 billion annually.
There are also reductions in federal spending for Medicaid, Medicare and the Affordable Care Act, reducing federal spending by $232 billion over the decade.
What are the changes and what do they cost in the current measure:
· Modifying the tax brackets: cost of $1.2 trillion
· Increase in the standard deduction: cost of $654 billion
· Repeal the alternative minimum tax: $769 billion
· Reduce rates for pass through entities: $362 billion
· Double the child tax credit: $431 billion
· Double the exemption from estate and gift taxes: $83 billion.
These tax reductions are offset by the repeal of personal exemptions and deductions, changing the indexing formula and closing the loophole for pass through losses.
· Repeal the deduction for personal exemptions: increases taxes by $1 trillion
· Repeal itemized deductions such as state and local taxes: increase of $1 trillion
· Disallowing certain losses for pass through entities: $137 billion increase
· Changing the CPI formula to adjust tax rates and exemptions: $115 billion increase.
The spending reductions are associated with reducing the tax penalties of non-compliance with individual responsibility under the Affordable Care Act to zero. This would increase individual insurance premiums by 10% annually as fewer healthy individuals enroll and increase the numbers of persons uninsured through Medicaid, the Exchanges, Medicare and employment based coverage by 13 million Americans. The federal budget savings from reducing enrollment would be $318 billion over the decade.
CBO graphically displays the impacts of these proposed changes by different income strata:
For taxpayers reporting incomes of less than $10,000 a year: there is a loss of aggregate income $1540 million on 2019, $5870 million in 2021, $8680 million in 2025 and $10,700 million in 2027. These changes are primarily due to the loss of health care coverage. Absent the loss of health coverage, they still pay $44 million more in taxes in 2027 than they would under current law.
For taxpayers reporting incomes between $10,000 and $20,000 annually: there is a loss of aggregate income $960 million on 2019, $9050 in 2021, $12,180 in 2025 and $16,060 in 2027. These changes are primarily due to the loss of health care coverage. Absent the loss of health coverage, they still pay $1,136 million more in taxes in 2027 than they would under current law.
For taxpayers reporting incomes between $20,000 and $30,000 annually: there is a loss of income $80 million on 2019, $9000 in 2021, $12,210 in 2025 and $16,720 in 2027. These changes are primarily due to the loss of health care coverage. Absent the loss of health coverage, they still pay $1,148 million more in taxes in 2027 than they would under current law.
For taxpayers reporting incomes between $30,000 and $40,000 annually: there is an income tax savings of $3,920 million on 2019, an income loss of $770 million in 2021, $2560 million in 2025 and $7610 million in 2027. These changes are primarily due to the loss of health care coverage. Absent the loss of health coverage, they still pay $583 million more in taxes in 2027 than they would under current law.
For taxpayers reporting incomes between $40,000 and $50,000 annually: there is an income tax savings of $6,920 million on 2019, an income tax savings of $2660 million in 2021, $1530 million in 2025 and an income loss of $5270 million in 2027. Absent the loss of health coverage, they still pay $287 million more in taxes in 2027 than they would under current law.
For taxpayers reporting incomes between $50,000 and $75,000 annually: there is an income tax savings of $22,270 million on 2019, an income tax savings of $19,470 million in 2021, $17,380 million in 2025 and an income loss of $3,980 million in 2027. Absent the loss of health coverage, they still pay $233 million more in taxes in 2027 than they would under current law.
For taxpayers reporting incomes between $200,000 and $500,000 annually: there is an income tax savings of $59,570 million on 2019, an income tax savings of $60,110 million in 2021, $54,530 million in 2025 and an income tax savings of $5,190 million in 2027. Absent the loss of health coverage, they still receive $4336 million in income tax reductions in 2027 than they would under current law.
For taxpayers reporting incomes between $500,000 and $1,000,000 annually: there is an income tax savings of $24,880 million on 2019, an income tax savings of $24,080 million in 2021, $20,000 million in 2025 and an income tax savings of $1,940 million in 2027. Absent the loss of health coverage, they still receive $1,743 million in income tax reductions in 2027 than they would under current law.
For taxpayers reporting incomes over $1,000,000 annually: there is an income tax savings of $34,100 million on 2019, an income tax savings of $28,690 million in 2021, $15,810 million in 2025 and an income tax savings of $5,780 million in 2027. Absent the loss of health coverage, they still receive $5,356 million in income tax reductions in 2027 than they would under current law.
On November 20, 2017, the Tax Policy Center analyzed the impacts on after tax income for all income groups only for the tax changes, not the health policy change:
· The lowest 1/5th receive an average tax cut of $6o a year by 2025, increasing their after tax income by 0.4%.
· The second quintile receive an average tax cut of $370 a year by 2025, increasing their after tax income by 0.9%.
· The middle quintile receive an average tax cut of $880 a year by 2025, increasing their after tax income by 1.2%.
· The fourth quintile receive an average tax cut of $1330 a year by 2025, increasing their after tax income by 1.1%.
· The fifth quintile receive an average tax cut of $5920 a year by 2025, increasing their after tax income by 1.9%.
· The top 1% of tax filers receive an average tax cut of $43,560 a year by 2025, increasing their after tax income by 2.1%.
· The top 0.1% of tax filers receive an average tax cut of $121,060 a year by 2025, increasing their after tax income by 1.3%.
By 2027, 28% of all Americans will be receiving tax cuts under the Senate bill and 50% will have tax increases. For the top 0.1%, 98% will be receiving tax cuts averaging $224,000 a person and 1.8% will experience tax increases averaging $1,150.
The full Senate is likely to vote next week and then tax reform will go to a House-Senate Conference Committee to iron out their differences. Hard as it is to believe, the House version is worse.
You might want to mention, by any means at your disposal, to any Republican Senator or Congressman in your state that this looks like legislative highway robbery for the very wealthiest Americans; it is certainly not middle class tax reform. At a time when income inequality is at an all time high, this is an unspeakable travesty.
Prepared by: Lucien Wulsin
Dated: 11/29/17