Senate tax bill would cut taxes of wealthy and increase taxes on families earning less than $75,000 by 2027

The following article by Heather Long was posted on the Washington Post website November 16, 2017:

Senate Majority Leader Mitch McConnell (R-Ky) said Nov. 14 that he was “optimistic” about adding the individual mandate repeal to the tax bill. (The Washington Post)

The tax bill Senate Republicans are championing would give large tax cuts to millionaires while raising taxes on American families earning $10,000 to $75,000 over the next decade, according to a report released Thursday by the Joint Committee on Taxation, Congress’s official nonpartisan analysts.

President Trump and Republican lawmakers have been heralding their bill as a win for hard-working Americans, but the JCT report casts doubt on that claim. Tax increases for households earning $10,000 to $30,000 would start in 2021 and grow sharply from there. By 2027, most Americans earning $75,000 a year or less would be forced to pay more in taxes, while people earning more than $100,000 a year would continue to get substantial tax cuts.

Most of the hit to poor and working-class Americans would come from the Senate Republicans’ push to insert a major health care change into the tax bill. Republicans are repealing the requirement that all Americans buy health insurance or face a penalty, a move that would lead to 13 million more uninsured Americans, the Congressional Budget Office has said. Many of those people earn modest incomes and currently receive tax credits and subsidies from the government to help them afford insurance. If the Senate GOP bill becomes law, premiums would rise and millions would opt not to buy insurance anymore, meaning their tax breaks would go away, explained Thomas Barthold, head of the JCT.

Sen. Orrin G. Hatch (R-Utah), the lead author of the GOP tax bill, dismissed the findings as an accounting gimmick.

“Anyone who says we’re hiking taxes on low-income families is misstating the facts,” he said. “Obviously we have no intention of raising taxes on those families. Every Republican on this committee has been committed to providing tax cuts for every income cohort.”

JCT Senate tax increase table

Hatch and other Republicans say that low-income people get a choice about whether to buy health insurance. If they no longer wish to do so, they would not get government subsidies anymore to help make their health insurance more affordable. JCT is calculating that as a tax increase, but Republicans say it is “ridiculous” to look at it that way. The subsidy was being paid to the insurance company, not to individuals.

“Did we take away their money? No,” says Sen. Mike Crapo (R-Idaho). “There’s not $1 taken away from them if they make that choice” not to buy insurance.

Len Burman, a senior fellow at the Tax Policy Center, a nonpartisan think tank, agrees with Republicans that the JCT report is “misleading.”

“This is not a burden increase,” Burman tweeted Thursday. “People who qualify for premium tax credits and drop insurance are better off doing it (their cost of insurance doesn’t change).”

The Tax Policy Center is the other well-known organization that calculates how tax changes affect the rich, the middle class and the poor. The center plans to release its own analysis soon. Unlike JCT, Burman says his organization won’t be counting the insurance subsidy losses as tax increases on the poor.

Democrats point out that the Republican bill has a deeper problem than the insurance subsidies going away. By 2027, most Americans earning less than $75,000 will end up paying more in taxes. A big reason for that is that the individual tax cuts would go away after 2025. Republicans opted to make the tax cuts for businesses permanent, but the cuts for individuals expire.

“What is happening now is just shameful,” Sen. Ron Wyden (D-Ore.) said shortly after the JCT tables were released. “I don’t know how anybody can go home and explain why it’s a good idea to hike taxes on parents who barely stay afloat to pay for a massive corporate handout.”

The middle class also would suffer in 2027 because the Republican plan is structured in a way that would cause more and more Americans to pay higher tax rates as time goes on. At the moment, tax brackets are based on income, and those brackets rise a bit by inflation every year. But the GOP wants to change that to a slower inflation measure, meaning more people will fall into higher brackets each year.

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