When House Republicans unveiled their new tax bill on Thursday, Speaker Paul Ryan declared that the plan would deliver “real relief” for the middle class and Americans “striving to get there.” He noted that a “typical family of four,” making $59,000, would save $1,182 on their taxes, enough to buy “about a year’s worth of gas for your car.”
As many experts have pointed out, however, the GOP’s plan would ultimately raise taxes on tens of millions of middle-income households—including, it just so happens, the very family of four Ryan described while trying to tout his legislation’s benefits.
That insight comes to us from New York University Law Professor David Kamin, who in a recent Medium post ran the numbers on how a married couple with two children earning $59,000 a year would fair under the GOP’s bill, compared to current law. In the first year of the plan, the family would indeed owe less in taxes.1 But in future years, that cut would shrink as temporary breaks expired and slower inflation adjustments took their toll. Eventually, the family would owe more to the IRS than under the current tax code, facing a $457 hike by 2027.
“It’s important to note that even with their cherry-picked example, this family too would experience a tax increase,” Kamin told me.
Here’s why our hypothetical family of four ends up losing out over time. The Republican bill would double the standard deduction that most Americans choose in lieu of itemizing. But it would also eliminate the personal exemptions that taxpayers take for themselves and each of their dependents. In their place, the legislation increases the Child Tax Credit by $600 dollars, and creates a new $300 “family flexibility tax credit” that each adult in the house can take.
The problem? First, the family flexibility credit disappears after 5 years. Maybe Congress would renew it. But—given the dysfunction in Washington—maybe it wouldn’t. Meanwhile, the Child Tax Credit isn’t indexed to grow inflation, whereas personal exemptions are.
Finally, the Republican bill would change the measure that the government uses to adjust the tax code for inflation each year, swapping in the slower-growing “chained” consumer price index. This also has the effect of increasing families’ taxes over time.
You can see how this sort of sneak tax increase would be politically advantageous for Republicans, who are scrambling to find money wherever they can to pay for large tax cuts aimed at corporations and wealthy business owners. Voters will probably notice if their taxes rise one year after a major law passes. Fewer people will realize it if, eight years from now, they’re paying higher taxes than they otherwise might have because Paul Ryan decided to switch an inflation index.
It’s also a deeply dishonest way to make public policy, especially when plugging your bill as a boon for the very working families you’re planning to victimize. The fact that Republicans couldn’t find a sympathetic model household that wouldn’t be subject to a tax hike under their plan tells you just how callous this legislation really is.
1It’s a slightly smaller cut than Ryan & Co. promised. Republicans compared the hypothetical family’s 2018 tax liability to its 2017 liability, rather than what they would pay next year if tax laws stay the same.