The plan would provide enormous benefits to corporate America, with a $2.6 billion cut in business taxes. Individual income tax revenue would actually increase by $470 billion, largely as a result of changes in personal deductions and exemptions as well as an increase in the bottom tax rate to 12 percent from 10 percent.
“Tax collections would shift dramatically from businesses to individuals,” said Eric Toder, co-director of the Tax Policy Center.
The loss of deductions would hit the upper middle class the most, and more than a third of the taxpayers who earn $150,000 to $300,000 could see their taxes go up next year, the report found. They would be hit particularly hard by the repeal of the state and local tax deduction.
Gary Cohn, director of the National Economic Council, said on Thursday that the typical American family making $100,000 per year would probably get a $1,000 tax cut next year. He suggested this would stimulate the economy as people put their additional money toward expenditures like kitchen renovations and buying new cars.
The Tax Policy Center estimates the plan will cost $2.4 trillion over a decade. Republicans are counting on a surge of economic growth to pay for their tax plan and the Tax Policy Center analysis does not account for those “dynamic” effects. However, the group’s analysts said that its previous studies of recent Republican tax plans showed little impact from growth on revenues, largely because of the likelihood that deficits would lead to higher interest rates.
Many aspects of the Republican plan are being left to Congress to decide. Thus far the proposal would slash the corporate tax rate to 20 percent from 35 percent, and create a new 25 percent tax rate for “pass through” businesses such as partnerships, sole proprietorships and family farms.
It would also lower the top individual tax rate to 35 percent from 39.6 percent, while raising the bottom rate to 12 percent from 10 percent as it also doubles the standard deduction. The plan would eliminate many corporate “loopholes” and deductions, such as the state and local tax deduction. But it would also get rid of many provisions that are currently costly to the rich, like the estate tax and the alternative minimum tax.
“It’s hard to see if you continue to have those provisions in a tax proposal that it doesn’t benefit high income individuals and households disproportionately,” said Mark J. Mazur, director of the Tax Policy Center and a former assistant secretary for tax policy at the Treasury Department.
Eliminating some of the more costly tax measures would make it impossible for Republicans to enact the deep cuts to tax rates that they are trying to achieve. Repealing personal exemptions, which diminishes the impact of doubling the standard deduction, for example, raises $1.5 trillion. Getting rid of the state and local deduction raises $1.3 trillion in revenue over 10 years.
Continue reading the main storySource: New York Times – Politics