The revised Senate Republican tax bill would lower taxes on all income groups at first, according to a new analysis released by Congress’ official tax experts Thursday, but eventually would translate into tax hikes for middle-income families.
The Joint Committee on Taxation, which is Congress’ in-house, nonpartisan tax group, estimated that the version of the Tax Cuts and Jobs Act released Wednesday would lower average tax rates from 20.7 percent to 19.4 percent in 2019 as the lower tax rates, larger standard deduction, and enlarged child tax credits kick in.
That finding doesn’t mean everyone gets a tax cut. Some families might still see tax increases, as suggested by earlier analyses, especially ones that today itemize lots of deductions for state and local taxes or mortgage interest. Nevertheless, it indicates that the GOP bill would provide tax cuts for most people in most income groups.
Over time, though, those cuts would translate into hikes for low- and middle-income families, in part thanks to a wrinkle caused by the amended bill’s repeal of the Obamacare individual mandate. As soon as 2021, taxpayers earning just $20,000 to $30,000 would see their average tax rates go up.
By 2027, all taxpayers under $100,000 would see taxes go up.
Those long-term tax increases in part take place because Republicans rewrote the bill to phase out all the individual tax cuts in 2025 in order to make the budget math work on paper. They say they intend for those breaks to be made permanent in the future.
“We could make the individual rates permanent, but it’s because our Democratic colleagues have chosen to go AWOL on the process and forced us to use the budget reconciliation process that we’re only able to do this for 10 years,” Republican Whip John Cornyn said Wednesday in the committee mark-up of the bill.
In fact, though, some of the income groups begin seeing tax hikes before the individual reforms sunset in 2025.
Some of what would appear on paper to be tax hikes reflect individuals choosing to no longer receive tax credits to purchase health insurance through the Obamacare exchanges, said Orrin Hatch, chairman of the Finance Committee. The Senate bill repeals the individual mandate that requires people to buy health insurance.
“This is the result of an assumption about economic behavior that is 100 percent voluntarily,” the Utah Republican said Thursday morning at the resumption of the committee’s mark-up of the bill.
“Anyone that says we’re hiking taxes on low-income families is misstating the facts,” he added.
“It is not a tax increase if a person decides they don’t want to by an Obamacare plan and, as a result, we don’t send a payment to an insurance company,” said Pat Toomey, R-Penn.
Democrats still used the new analysis to attack the Republican bill. Under its provisions, middle class families get “clobbered,” ranking Democrat Ron Wyden of Oregon said, and the money is used “to pay for this handout to multinational corporations.”
