The new tax law will directly cut the taxes of nearly two-thirds of households this year, according to a new analysis released Wednesday by the nonprofit Tax Policy Center.
The think tank found the individual provisions of the law signed by President Trump in December will reduce taxes for 65 percent of households in 2018, while raising the tax bills of 6 percent.
Those numbers relate just to what people will pay on their individual taxes. Wednesday’s report differs from previous analyses because they have also included the effects of the changes the law made to business taxes or the individual mandate of the Affordable Care Act, allowing for a clearer sense of how the tax cuts should affect take-home pay.
The finding is important because at least one recent survey found most people aren’t yet seeing or noticing the Trump tax cuts showing up in their paychecks via lower withholding. The Tax Policy Center analysis suggests that, eventually, they probably will.
The report finds the law will cut taxes by $1,260 on average, or slightly less than 2 percent of income. Higher earners will get bigger tax cuts, both in dollar terms and relative to income.
Those benefits, though, will be limited for some rich people in high-tax states because of the law’s $10,000 limitation on the deductibility of state and local taxes — a provision fiercely protested by governors in blue states like New York and New Jersey.
For instance, the top 1 percent income earners in New York will only see a tax cut of 1.3 percent of income in New York, thanks to the limitation on SALT deductions. In low-tax Texas, earners in the same bracket will get a 4.1 percent boost.
For those outside the 1 percent, though, there won’t be too much difference between states in the benefit of the tax cuts.
Republicans are counting on more families seeing bigger paychecks and crediting the law form them before the midterm elections.
