By Ryan Ellis
One of the strongest positive elements of tax reform is that it features net tax relief for all Americans at all levels of income.
This has already been seen in several charts produced thus far:
As you can see above, taxes paid declines across the board. The tax relief is greater for the lower end of the spectrum than the higher end, but it’s a tax cut for everyone.
What does that do to after-tax income?
Well, income after taxes rises for everyone under this plan.
Everyone’s taxes go down, and everyone’s after-tax income goes up.
What about in states like New York, New Jersey, and California? Aren’t those states going to be worse off under tax reform because the state and local tax deduction is limited to $10,000 in property taxes? Not according to the Tax Foundation:
The tax reform bill will create nearly 1 million jobs and raise after tax income for a middle class family by $2600.
In New York, over 63,000 jobs are created and after tax income for a middle class family rises by over $2700.
In New Jersey, nearly 28,000 jobs are created and after tax income for a middle class family rises by over $3000.
In California, over 111,000 jobs are created and after tax income for a middle class family rises by nearly $3000.
Notice a pattern?
Now today we have the Cato Institute out with their estimate of the income tax relief (as opposed to the total tax relief) in the plan. See below:
The Cato Institute data shows income tax relief across the board, in every income stratum. Even millionaires, the target of so many crocodile tears of late by the Wall Street Journal editorial page, see an income tax cut in 2019 of 7.2 percent. Let’s not forget that millionaires see a reduction in their average tax rate, their share of total taxes paid, and in their tax burden in dollar terms. Those making more than $1 million per year do very well under this bill.
All taxpayers receive an average percentage income tax cut of nearly 10 percent in 2019. Their average tax rate declines. They pay less in taxes in actual dollars.
Cato’s Chris Edwards isn’t happy that the biggest percentage cut (by far) goes to families making $40,000 to $50,000. But in fairness, that’s exactly what President Trump and Congressional Republicans have been promising all along: a big middle class tax cut that makes the system simpler for the middle class. It just so happens that tax reform also cuts taxes for everyone else in the process, and makes our business tax code far more competitive than it is today.
UPDATE 11/9/2017: Since publishing, the ultra-liberal Tax Policy Center released their (corrected) distributional analysis of the House bill. We can safely assume this casts the House bill in the worst possible light, given the checkered history of the Tax Policy Center.
Yet even they have to admit what is obvious to everyone else, too: among all income groups, the average tax rate declines, the percent change in after-tax income rises, and the dollar tax cuts are significant.
Read more here.
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