Just in time for a potential full Senate vote, we now have significantly more data about what exactly the Senate tax overhaul would do, and whom it would affect. In particular, we want to look at the latest numbers from the Congressional Budget Office.
The CBO report, which came out Sunday, was unusual because it does not just look at the Senate bill’s impact on people’s taxes. It also analyzes spending cuts the GOP tax plan would trigger, and how those cuts would affect the rich and poor.
As you will see, our analysis of the new data shows the Senate Republicans’ bill would move resources away from lower-income Americans and toward upper and upper-middle class Americans.
How much each family or taxpayer gains or loses
We started by looking at what the tax bill means for each person or family. (Note: A “tax unit” is one person or group filing one tax return. So an individual could be one tax unit and a married couple filing jointly could be one.)
Highlighted in red, you can see lower-income groups face overall losses, per person or family, in this plan. But take a closer look at the amounts. The size of the losses for lower incomes is dwarfed by the massive gains — up to $59,000 per tax filer — at the upper end of the income scale.
Ok, but don’t the wealthy get more of a nominal benefit because they have much larger incomes? Isn’t it all nearly even when you factor in the higher and lower incomes involved?
Actually, no. We took the midpoint for income in each group (for example, $15,000 for those earning between $10,000 and $20,000) and divided the overall effect on the group by that income amount. The result? As you can see in the next chart, the wealthy not only gain the most in dollar amounts but they also gain the most relative to their income.
For instance, Americans making $10,000 to $20,000 would see barely any change — a loss worth just 0.14 percent of their income next year. But Americans making $500,000 to $1 million next year would see a net benefit that’s worth nearly 3 percent of their income.
And a final question what about the population size of each group? Doesn’t that change the math here? Again, no.
Below, we crunched the data for the percentage of federal tax returns which come from each income group, and compared that to relative size of the benefit or loss for each group.
Our numbers show a very clear reversal: lower income groups have larger amounts of taxpayers but would benefit far less from this tax overhaul. Higher income groups have far fewer taxpayers, and would gain many times more from the GOP bill.
Of course, Republicans correctly point out that the wealthy, while fewer in number, pay for a much larger portion of U.S. taxes than other groups. It’s part of their argument for a sweeping change that goes well beyond tax cuts or tax reform.
But these numbers show what conservatives rarely say directly these days — that they believe the U.S. tax system is too progressive, and moves too many resources from the rich to the poor.
The GOP tax plan is a decided shift in the other direction.