A new analysis of tax proposals put forward by former President Trump has found they would amount to tax cuts for the wealthiest Americans and tax increases for the majority of households.
The wealthiest 1 percent would see an average tax decrease of more than $36,000 while the bulk of lower quintiles of the population would see tax increases of around $1,500, according to a new study by the Institute on Taxation and Economic Policy (ITEP).
Trump’s tax plans have included general tariffs, a lower corporate tax rate, a cancellation of taxes on tips and overtime pay and as an extension of the individual tax cuts in his signature 2017 Tax Cuts and Jobs Act.
“Often we find that tax policies affect the richest 1 percent or the richest 5 percent much differently than they do other people, and that’s definitely what we found here,” ITEP federal policy director Steve Wamhoff said during a presentation of the findings on Monday.
The extensions of the 2017 tax law provisions appear to have the most pronounced effect of any individual policy change, dropping tax burdens by an average of $81,000 for the wealthiest 1 percent, and by an average of $110 for the poorest 20 percent.
The Joint Committee on Taxation found that extending the individual provisions of the Trump tax cuts would add $3.3 trillion to the deficit over the next ten years. Many different policy experts in Washington are concerned now about the level of the federal deficit.
Wamhoff noted that ITEP’s study looked at the distribution of wealth within the economy as a whole, as opposed to on a regional or state-by-state basis, where the distributional effects of tax benefits may vary.
Expirations built into the tax code have Democrats and Republicans preparing for major negotiations next year, depending upon the outcome of the election in November.
If one party sweeps the White House and Congress, tax legislation could be passed relatively quickly through the budget reconciliation process. If there is divided government, negotiations could continue throughout the course of the year.
There’s a chance something could get done on taxes in the lame duck session, though that may be confined to business taxes and tax credits for families, on which there has already been a fair amount of legislative work accomplished this year.
Over the summer, there was a vote on expanding the child tax credit and reinstituting a research and development credit. It passed the GOP-controlled House earlier in the year but fell in the Senate to a Republican filibuster.
