Local expert weighs in on Republican proposed tax code

Paul Ryan and Donald Trump.   Carlos Barria  Reuters

First, the plan introduces a Family Flexibility Credit worth $300 for every adult in the household.

The JCT found that the GOP bill would add almost $1.5 trillion to the debt over the next decade and that, on average, families earning between $20,000 and $40,000 a year and between $200,000 to $500,000 would pay more in individual income taxes in 2023 and beyond. She found that millionaires would see their after-tax incomes rise by 2.2 percent after a decade, and that is without factoring in how wealthy families benefit for the elimination of the estate tax.

As House Leader Paul Ryan (R-Wis.) and his colleagues said in a press conference unveiling some of the proposal's details, "the typical family of four will save $1,182 a year on their taxes". In general, large families and those that now take a lot of deductions for medical expenses or state and local taxes are hurt the most by the changes in the GOP plan.

It may not be the "rocket ship" many are looking for but all of the Tax Foundation's examples received a tax cut, although the size of that reduction varies. The rest of the tax cuts appear to favor the wealthy.

Gary Cohn, the president's top economic adviser, told the Economic Club of Washington that the objective was to help the middle class. But he declined to say whether the wealthy would benefit.

The conservative Tax Foundation's analysis of how different families would fare under the plan suggested that the largest cuts as a percentage of taxes paid would go next year to sample couples earning between $48,000 and $85,000. Republicans could make the Family Flexibility Credit permanent, or they could increase the Child Tax Credit, or they could make the Child Tax Credit indexed to inflation. "Unfortunately, JCT's analysis omits the economic effects of tax reform in their distributional tables". JCT found that more Americans would be better off, but some families, especially in the $20,000 to $40,000 range would still see tax increases after 2023.

Trump's administration is pressuring Congress to pass the "Tax and Jobs Act" in two months. As the CBPP explained in September after the Republicans unveiled the framework for their plan, the Party "proposed to make their Child Tax Credit increase non-refundable, meaning that working families with incomes too low to have federal income tax liability would not benefit". According to a person familiar with the negotiations, who spoke on the condition of anonymity because they were not authorized to speak publicly, Republicans expect the tax break for the middle class will be extended, although it's not clear right now how that would happen.

But most mainstream economists have disputed that claim.

Some tax experts say the tax overhaul might also hurt those who aspire to be middle class. The bottom half of taxpayers now pay no net income tax, according to Treasury Department figures. Many receive refunds via the Earned Income Tax Credit. The Republican plan would require eligible taxpayers to provide their Social Security Number to receive this benefit, thereby creating a possible delay in receiving a refund as the IRS enforces this provision.

Ryan's correct that $59,000 is smack dab in the middle of the income spectrum.

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