Thursday, March 02, 2017

President Trump's disingenuous middle-class tax cut pitch

Dylan Matthews · Tuesday, February 28, 2017, 8:22 pm

One of President Trump's main points at his first address to Congress, according to a sheet of talking points distributed to the press before the event, is a demand that "The middle class must get tax relief."

This isn’t too surprising; Trump has been hitting this line since the campaign, and reiterated it again and again upon taking office. “We are going to be cutting taxes massively for both the middle class and for companies,” he said shortly after being inaugurated; he repeated that line in his February address to the Conservative Political Action Conference. His Treasury secretary, Steve Mnuchin, has promised “the most significant middle-income tax cut since Reagan.”

There’s just one problem: Neither Trump’s tax plan (the one from the campaign; he hasn’t offered a new one as president) nor the Better Way plan from House Republicans, which could play just as an important role in shaping the tax reforms that Congress ultimately passes, is designed to primarily help the middle class. Only 6.6 percent of the cost of Trump's plan goes to cuts for the middle fifth of taxpayers, households making between $48,400 and $84,300 a year, according to the Tax Policy Center. By contrast, a whopping 47.3 percent goes to the top 1 percent, and nearly a quarter goes to the top 0.1 percent, all of whom make over $3.75 million a year.

To make matters worst, many middle-class families would actually see a tax hike under Trump’s campaign plan, as NYU professor Lily Batchelder has found. That’s because Trump wants to increase the bottom tax bracket from 10 percent to 12 percent, eliminate head-of-household filing status for single parents and other caregivers, and get rid of personal exemptions.

Paul Ryan and other House Republicans’ A Better Way plan is, if anything, worse on this score. While it doesn’t hurt certain middle-class families the same way that Trump’s plan does, it manages to be even more lopsidedly pro-rich. While Trump would offer the middle class a roughly $1,000 annual tax cut, on average, Ryan would give them $260 a year in the first decade and only $60 in the second. And 76.1 percent of the plan’s cost goes to cuts for the top 1 percent; in the second decade, that rises to an astonishing 99.6 percent, with 61 percent going to the top 0.1 percent. Indeed, by then the plan starts modestly increasing taxes on the upper middle class, to pay for bigger cuts for the ultra rich.

Of course, both Ryan and Trump like to defend their plans by arguing they’d create economic growth effects large enough to help the middle class much more. But even the right-leaning Tax Foundation, which tends to conclude that tax cuts help economic growth much more than other analysts think, finds that the middle class gains substantially less under both Trump and Ryan’s plans than does the top 1 percent. Even in the very best-case scenario, these are not plans designed to help the middle class.

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