It seems like the richest 1% households in the United States will be the recipients of almost 50 percent of the benefits promised by the Republican tax reform by 2027.
Analysts suggest that the after-tax incomes of this section of the population will likely increase by 2.2 percent. On the other hand, taxpayers in the lower income groups would see very little change. A 0.4 percent boost might be enjoyed by the middle-income households.
Is tax reform a boon for the wealthy only?
The Democrats drew this analysis in an attempt to target the proposals of the House Republicans and portray them as a trick to lure the wealthier households. The Republicans, on the other hand, have been selling the tax reform as a big advantage to the entire middle class of the United States and also a huge lift to economic growth, job development, and investment.
According to Mark Mazur, Tax Policy Center, the bill would amount to a decent tax decline for the majority of the U.S. households. But the tax decline for the people in the higher-income groups will be quite large.
It doesn’t come as a surprise that the tax benefits were inclined towards the higher income groups as they would gain from measures like the proposed removal of real estate tax, a tax that only impacts a small percentage of the very wealthy households in the United States. Further, the reduced tax rate imposed on small-sized businesses would benefit business owners.
Republican tax reform to cause deficit increase
The report released by the Tax Policy Center does not highlight the potential growth effects of these tax reforms. The Tax Foundation had released an earlier report that focuses on the growth advantages of the tax reforms and is hence given more weight by the Republicans. This report states that the tax reform would cause a 3.1% boost in wages and create 975,000 new jobs in the economy.
A rather worrying conclusion of the report for Republicans was the finding that the proposed plan would cause a drop in federal revenues- $1.98 trillion over a period ten years. On Wednesday, the Congressional Budget Office drew a conclusion that the tax bill of the Republicans would cause the deficit to increase by $1.7 trillion over ten years, once additional costs for debt servicing were incorporated (but macroeconomic effects were excluded).