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The Senate’s Tax Bill Is Still a Cruddy Deal for the Middle Class

WASHINGTON, DC - NOVEMBER 09:   (L-R) U.S. Senate Majority Leader Sen. Mitch McConnell (R-KY), Chairman of U.S. Senate Finance Committee Sen. Orrin Hatch (R-UT), Secretary of the Treasury Steven Mnuchin, and Director of the National Economic Council Gary Cohn during a meeting with members of the Senate Finance Committee November 9, 2017 at the Capitol in Washington, DC. Senate Republicans unveiled their version of the tax reform plan.  (Photo by Alex Wong/Getty Images)
They know who their donors are.
Alex Wong/Getty Images

Credit where it’s due: The tax reform bill that Senate Republicans revealed last week is less of an egregious giveaway to the very wealthy than what’s being concocted in the House.

Contrary to what some headlines have suggested, however, the biggest winner under the Senate’s plan is not the middle class. Far from it. The legislation still favors the rich—particularly those who stand to benefit from corporate tax cuts—and millions of ordinary households either won’t get much in the bargain at all or will end up owing more to the IRS than they do now.

The House tax plan was a gaudy gift to the GOP’s donors—the legislative equivalent of wrapping a bow around a Buggati and leaving it in Charles Koch’s driveway. According to the Joint Committee on Taxation’s most recent analysis, almost 32 percent of its benefits would have flowed to households—technically, “tax units”—with incomes topping $1 million in 2027. By comparison, the Senate’s bill is a little less skewed toward the interests of the extremely wealthy, with just over 12 percent of its total tax cuts benefitting families with seven-figure incomes.

The Senate bill is still skewed towards the rich
Jordan Weissmann/Slate

But “better than the House bill” is a pretty abysmally low standard. In the end, the Senate plan still devotes about 43 percent of its tax cuts to households making more than $200,000 per year, or just over 6 percent of future tax filers, according to the JCT. If you factor in planned changes to the estate tax, which the committee’s score does not, the plan is even more slanted towards the well-off.

The House bill was also criticized for hiking taxes on a large number of middle-class families as it handed it out relief to millionaires. Again, the Senate bill is better in this respect, but not great. Under the plan now making its way through the upper chamber, almost 1 in 5 families making between $100,000 and $200,000 would face a tax hike of at least $500 by 2027, according to the JCT; among those earning between $75,000 and $100,000, around 1 in 7 families would see their taxes go up.

The Senate hikes taxes on many middle class families
Jordan Weissmann/Slate

To be sure, the majority of middle class households would get a tax cut under the Senate’s bill. But all told, nearly 42 percent of taxpayers with incomes under $200,000 either would not see any significant change in their taxes by 2027 or would end up stuck with a hike. That group will encompass more than 73 million families, according to the JCT.

Half of middle-class families don't benefit from the Senate's tax plan
Jordan Weissmann/Slate

The Senate bill also looks like a fairly cruddy deal for the middle-class when you see just how many dollars your typical taxpayers can expect to save under it. New York University professor David Kamin, who focuses on tax and budget policy, calculates that the average household making between $40,000 to $50,000 in 2027 should net an extra $480 dollars under the GOP’s plan. That amounts to a 0.9 percent income boost. Those in the millionaires’ bracket pocket an extra $48,680 a piece on average, getting a 1.7 percent increase in income.

The Senate bill is regressive
Note: Based on JCT estimates adjusted to include estate tax cuts using the Tax Policy Center’s distribution of the estate tax.
David Kamin

Even though they won’t see much extra in their savings accounts, there is one measure by which middle-class families can be considered the big victors of the Republican tax plan. Technically, they see the biggest percentage point drop in their tax burden. So, according to Kamin’s calculations, a household making $20,000 to $30,000 will pay 10.3 percent less to the government, whereas millionaires only pay 3.5 percent less.

This is a useful talking point for Republicans who want to claim they really are providing middle-class tax relief. The problem is that, once you pull your face away from a spreadsheet, a 10 percent income-tax cut doesn’t mean much to a shift-worker at Target—it’s about $140, as Kamin’s chart shows. That person would benefit a lot more from a plan focused on cutting payroll taxes, or, you know, a government program that simply paid for their health care.

When it comes to helping the middle class, the Senate bill is a step up from the awful example set by the House. But let’s not give in to the soft bigotry of low expectations. Outshining Paul Ryan on this front isn’t really something to get excited about.

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