Worth Noting

The Joint Committee On Taxation

December 21, 2017

The distribution tables from the Joint Committee on Taxation (JCT) for the tax reform bill passed by Congress give the lie to Democratic claims that the legislation is a big tax cut for the 1% and the shaft for the middle class.

According to my former Bush 43 colleague, Dr. Larry Lindsey, the JCT analysis shows that taxpayers with $50,000 or less in income will get an 11.2% average cut in their federal taxes, while those making over $1 million will get a 5.9% cut.  This calculation includes the effect of all the tax cuts in the bill, including the corporate tax rate cut provision.

Another way to look at the legislation is to examine its effect on the share of income taxes paid.  The JCT says under the bill, the bottom 50% of filers (those with adjusted gross income (AGI) of $40,000 or less) paid 2% of all federal income taxes last year and will receive 4.5% of the total personal income tax cut.  This means additional millions will have no tax burden and many millions more will receive money in the form of a tax credit.

The next 45% of filers (those making between $40,000 and $200,000 AGI) paid 37.6% of the personal income tax burden last year and will receive 51.7% of the tax cut.  The top 5% of filers – those making more than $200,000 AGI – paid 59.5% of the personal income taxes collected and will receive 43.8% of the cuts contained in the bill.

As Dr. Lindsey points out, this means the 45% of filers who are broadly “the middle class” will get almost twice as big a reduction in their tax burden as the top 5% (and nearly three times the reduction of the top 1%).  Put another way, the middle class are much bigger winners in seeing their tax burden reduced than either the top 5% or 1%.

For the nerds among you, here’s the link to the JCT report. 

https://www.jct.gov/publications.html?func=startdown&id=5054

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