Early this month I published a diary about a better way to portray the Republican tax plan. I made the case that it would be more effective to talk about how much middle class taxpayers and those less fortunate lose by giving the richest a tax cut. Typically, Democratic politicians and the media talk about how the rich get the biggest portion of the tax cuts. That’s about how unfair the plan is, but it doesn’t really illustrate what it costs everyone else. Telling someone that they’re getting less than someone else is not as pointed as telling them they are losing money because it’s going to someone else. It’s the difference between feeling neglected versus actively deprived.
That diary was partly a plea for help in finding data to determine how much the less fortunate lose to the richest in the Republican tax plan. Alas, no joy, so I also contacted people who I thought might know about (i.e., economists, financial journalists) and was eventually directed to data published by the Tax Policy Center. I have described the results in comments to several diaries and here lay it out in one place for what it’s worth.
To start, here are the data that I worked from. The first table shows results for 2018 and the second for 2027, the last year of the plan. There are many other tables at the above link, slicing and dicing the data in different ways, some beyond me, but the data below provides enough information to get some rough idea what the consequences of what the lower income taxpayers lose by giving the tax cut to the richest instead of to them. So the data …
Calculations: To calculate the amount of money in tax saving for the less fortunate, I first multiplied the number of Tax Units (i.e., taxpayers) in the Top 1% by their Average Federal Tax Change to get the total amount of money saved by the 1%. (In the table, the tax change is a negative number so to portray tax savings, the calculation was done using it as a positive number.) Next, I divided the total tax savings of the 1% by the total number of tax payers in the bottom three quintiles for Expended Cash Income.
Results: For 2018, the 1% will save a total of $42.7 billion, increasing to $64.4 billion in 2027. If these amounts were given instead to those in lower income brackets, they would individually save an average of about $350 in taxes in 2018 and $500 in 2027 over and above what tax savings (changes) are shown in the tables. Using an income cut off of around $50,000, the loss in taxes is more like $500 and $700 for each taxpayer in, respectively, 2018 and 2027.
Note that the tables show that by 2027 the tax cuts for those in the bottom quintiles are essentially gone, whereas the 1% save more over time. By 2027, you’re getting a $10 tax cut if you make less than $28,000 and a $40 tax cut if you’re making less than about $55,000. The 1% get a $52,780 cut, while the 0.1% a $278,370 cut. Relative to 2018, this is about an 85% decrease in tax savings for the less fortunate and increase in tax savings of 41% for the 1% and 56% for the 0.1%.
Caveat: I really don’t know what I’m doing. I expect there are many subtleties I’m missing with my simpleminded calculations. For example, it’s not clear if all this takes certain deductions that would affect taxpayers at different income levels differently. Perhaps someone here with more expertise could chime in.
Conclusions: No surprise here — those at the bottom levels of income are getting screwed by the Republican tax plan. But it’s not just that they are getting less in tax cuts/savings than the rich. The poor(er) are losing significant amounts of money to the rich.
Admittedly, this analysis assumes a zero sum game based on the total amount of tax cuts the Republicans want. You could argue we’d do better by lowering the total amount of individual, to say nothing of corporate, tax cuts. There’s a convincing, if not settled, case that tax cuts for the rich and corporations is not very stimulative to the economy because it’s largely just saved or, in the case of corporations, spent to buy back stock and pay dividends. Further, tax cuts for middle and lower income taxpayers is more stimulative because they spend that cut on stuff — good old consumer spending that drives a large part of the economy. If you accept this, then the Republican plan is a double whammy: it not only directs tax saving to unproductive saving and spending, but takes it away from those whose spending is more productive for the economy.
When I grew up, Robin Hood was a hero — take from the rich and give to the poor was a good thing. The Republicans “believe” that giving to the rich benefits the poor. But if the Republicans want to believe in trickle down economics, why not cut out the middle (rich) man and give it directly to the poor? Seems to me that would be more a more effective use of the money — no?
