The Tax Cuts: Who Benefits?

The most accurate nonpartisan estimates on how taxpayers are likely to be impacted by the changes proposed in the House and Senate tax bills comes from the Joint Committee on Taxation (JCT).  JCT is a strictly nonpartisan staff of tax attorneys and revenue estimators employed by Congress and overseen jointly by both political parties in the House and the Senate.

JCT released on Nov. 16 estimates of how the House tax bill would impact people across eleven income categories every other year for the next 10 years, specifically, in 2019, 2021, 2023, 2025, and 2027.

JCT released on Nov. 24 a similar set of estimates for the bill reported by the Senate Finance Committee, but they have not yet released (as of 12/11) estimates for the modified bill that passed the Senate.

The Congressional Research Service, a strictly nonpartisan think-thank providing policy analysis to Congress, in a Nov. 21 report, provided an analysis of the JCT’s distributional estimates.

Key observations of House and Senate tax bill impact over the next decade based on the three nonpartisan reports:

  • Higher-income groups tend to have the largest percentage increases in after-tax income. 
  • Both bills would produce the largest percentage increases in after-tax income in the years immediately following enactment, with the percentage increase in after-tax income tending to decline over time.
  • Taxpayers earning less than $50,000 have either very small increases (less than 1%) in after-tax income and, in some years, reductions in after-tax income (due to elimination of tax deductions or subsidies under the Affordable Care Act).
  • Taxpayers earning between $50,000 and $200,000, can expect after-tax income increases of between 1% and 2% in the early years, but in the later years, the increases fall off under the House bill to less than a half percent.
  • Taxpayers earning between $200,000 and $500,000, under the House bill see 1% to 2% income growth but only in the early years. Under the Senate bill, they see income growth between 2% and 3%, although that income growth disappears in the later years.
  • In the Senate bill, the highest percentage growth in after tax income goes to taxpayers earning between $500,000 and $1 million, and in the House bill to taxpayers earning over $1 million.
  • Looking at total tax cuts (rather than after-tax income) taxpayers earning between $500,000 and $1 million would receive about 5% of total tax cuts under the House bill, and 11% under the Senate bill.
  • Taxpayers earning over $1 million would receive 25% of total tax cuts under the House bill, and 12% under the Senate bill.