The Joint Committee on Taxation (JCT) has released its distributional analysis of the final Republican tax bill. The bill provides even larger percentage cuts for middle earners than previous versions of the legislation.
If the legislation is enacted, higher earners will pay an even larger share of the overall income tax burden than they do now. Our highly “progressive” income tax will be even more progressive. That approach is counter to sound fiscal governance and undermines the growth potential of tax reform, but that is what Republicans are delivering.
Looking at JCT’s table for 2019, second column, the percentage cuts are roughly similar across income groups from $20,000 to $1,000,000. But the JCT table slants the results by including payroll and excise taxes. The table under-measures the percentage cuts to the middle compared to the top.
The table below takes estimated payroll and excise taxes out of the JCT data. It shows individual and corporate income tax cuts as a percentage of estimated individual and corporate income taxes paid under current law. Middle-income households will receive by far the largest percentage income tax cuts in 2019.
Data Notes: Households less than $40,000 are shown as “n/a” because they do not pay income taxes in aggregate. JCT does not appear to publish current law estimates of individual and corporate income taxes only for 2019, so I estimated them using ratios from this TPC table.
This Cato Institute article was republished with permission.
[Image Credit: By Caleb Smith; Office of the Speaker of the House [Public domain], via Wikimedia Commons]
Chris Edwards is the director of tax policy studies at Cato and editor of www.DownsizingGovernment.org. He is a top expert on federal and state tax and budget issues. Before joining Cato, Edwards was a senior economist on the congressional Joint Economic Committee, a manager with PricewaterhouseCoopers, and an economist with the Tax Foundation. Edwards has testified to Congress on fiscal issues many times, and his articles on tax and budget policies have appeared in the Washington Post, the Wall Street Journal, and other major newspapers. He is the author of Downsizing the Federal Government and coauthor of Global Tax Revolution.
Edwards holds a BA in Economics from the University of Waterloo and an MA in Economics from George Mason University. He was a member of the Fiscal Future Commission of the National Academy of Sciences.