Details on the Fiscal Impacts of GOP Tax Cuts for Individuals

Details on the Fiscal Impacts of GOP Tax Cuts for Individuals

from the Joint Committee on Taxation Analysis


The GOP tax cut bill has passed both the House and Senate and is headed for President Trump’s desk. The tax cuts for individuals are for the most part temporary. They will begin in 2018 and continue until 2025 when most will revert to existing law.

The thresholds for the tax brackets will be increased and the top tax bracket for the wealthiest will be reduced from 39.6% to 37%. This will save taxpayers $1.2 trillion. The standard deduction will be doubled to $12,000 for an individual and $24,000 for couples filing jointly. This will save taxpayers $720 billion.

The child tax credit will be doubled to $2,000. This will save taxpayers $573 billion. The alternative minimum tax will be increased, saving wealthy taxpayers like President Trump $637 billion.

On the tax increase side, the personal exemptions will be repealed, adding $1.2 billion to taxpayer’s liabilities. Itemized deductions will be reduced (e.g. the state and local tax deduction will be capped at $10,000 and home mortgage interest capped at $750,000) or eliminated (casualty losses and employee's work expenses). This will add $668 billion to taxpayer liabilities beginning next year.

The ACA (Affordable Care Act) tax (aka individual mandate) on individuals who fail to enroll in coverage will be reduced to zero beginning in 2019. This is scored at a budget savings of $314 billion and assumes that up to 13 million people will not enroll in health coverage.

The 20% deduction on pass through income for individuals owning their own businesses (pass through entities), such as President Donald Trump and Senator Bob Corker, will save them $414 billion. Doubling the estate tax exemption to $11 million for an individual and $22 million for couples will save the heirs of very wealthy individuals who pass away during the period between 2018 and 2015 about $83 billion.

In general, the GOP’s tax reform package disproportionately benefits the very wealthy at the expense of most everyone else, as discussed in yesterday’s post. The top 5% of taxpayer’s receive 42.5% of the individual tax cuts in 2018 and the top 1% of taxpayers will receive 83% of the individual tax cuts still in effect by 2027. It will increase income inequality as a result. Upper middle and middle income families in the high cost coastal regions of California will be hurt by the bill's caps on deductions for state and local taxes and mortgage interest come tax filing time.

By 2027, over 50% of all Americans will be paying more in taxes and less than 25% will be paying less in taxes. By comparison among the top 1%, 3/4ths  will pay less in taxes and 1/4th will be paying more.

In 2018, expect Speaker Ryan and President Trump and colleagues to go after Medicare, Medicaid, Social Security, the ACA and other federal entitlement programs for spending reductions/budget cuts, proclaiming they need to close the yawning budget deficits they just created.

Let's defeat the kleptocracy in 2018.


Prepared by: Lucien Wulsin

Dated: 12/20/17



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Distribution of the GOP Tax Cuts in the Conference Committee Bill