An analysis of the finalized Republican tax plan has found that nearly one-half of the legislation's proposed tax cuts would go to the wealthiest 1 percent of Americans over the next decade. GOP lawmakers have asserted that the bill will primarily benefit the middle class.
On Nov. 2, House Republicans unveiled a finished version of the Tax Cuts and Jobs Act. The legislation would cut the corporate tax rate from 35 percent to 20 percent, increase the standard deduction and increase the child tax credit. Republican House Speaker Rep. Paul Ryan of Wisconsin asserted the bill was designed to benefit middle class families.
"It's very clear and obvious that the whole purpose of this is a middle-class tax cut," Ryan told CNN. "And more to the point, we need to get faster economic growth."
On Nov. 6, an analysis by the progressive-leaning Institute on Taxation and Economic Policy found that the Republican tax plan would primarily benefit the wealthiest citizens. The analysis estimated the richest 1 percent would receive 31 percent of the plan's tax cuts in its first year and eventually receive 48 percent of the cuts by 2027, New York magazine reports.
The study found that Americans in the bottom 20 percent income bracket would only receive a 2 percent tax cut over the next decade. Everyone else would see a reduction in their tax cuts over a decade. Americans in the middle 40 percent to 60 percent income range would see a reduction of 10 percent to their 2018 taxes but that cut would shrink to 8 percent by 2027.
The findings are similar to independent analyses of the Republicans' tax plan draft. On Sept. 29, the nonpartisan Urban-Brookings Tax Policy Center found that the richest 1 percent would receive 50 percent of tax cuts from the Republicans' unfinished tax legislation while the middle class would potentially face tax increases over a decade, according to Business Insider.
GOP lawmakers blasted the Tax Policy Center's analysis, asserting that they were drawing conclusions from an unfinished bill. Ryan dismissed the independent center as "an anti-reform, propaganda group."
The latest study indicates that the Tax Policy Center's analysis was largely accurate. One component of the finished tax plan that would be a boon to the wealthiest Americans is its proposal to gradually phase out the estate tax, which applies to Americans with assets that exceed $5.49 million. Currently, roughly 5,000 Americans pay the 40 percent tax.
The Republicans' tax plan would double the threshold for the estate tax to $11.2 million in its first year, resulting in 3,200 heirs no longer having to pay a tax on assets that are passed onto them through their estate. By 2024, the estate tax would be eliminated altogether, according to The Washington Post.
"There will be winners and losers in tax reform, and as it stands now, I worry that the benefits that are claimed to go to the middle-income households won't play out," Bill Hoagland, senior vice presidentof the Bipartisan Policy Center, told CNBC.
If the Republican tax plan is passed by Congress and signed into law by President Donald Trump in 2017, it still would not go into effect until April 2019, when Americans file tax returns for their 2018 income. Oxford Economics has given the Republican tax plan a 60 percent likelihood of becoming law, CBS News reports.
"Since Republicans are desperate for a major accomplishment after repeated failures on health care reform, we believe they will manage to find a compromise to pass tax cut legislation," Oxford Economics predicted in a research note. "Many major GOP donors have threatened to close their checkbooks if Congress fails to get this done."