Republicans Admit Tax Reform Won't Benefit All Middle-Class Households

Their plan simplifies the tax code partly by taking away some benefits.

WASHINGTON ― Republicans say their tax plan is designed to help the middle class, but they also won’t guarantee that it will.

There’s good reason they won’t make that promise: The GOP plan would still overwhelmingly benefit the wealthy, and could actually mean a tax increase for some Americans with average incomes.

House Speaker Paul Ryan (R-Wis.) said on Sunday the proposal’s purpose “is to get a middle-class tax cut.” But when CBS “Face the Nation” host John Dickerson asked him if he could guarantee a cut for every middle-class family, Ryan stopped short.

“Well, I don’t know every single person’s little, small problem or issue,” he said.

Ryan’s hesitation contrasts with Republican talking points about how the plan mostly benefits the middle class, but he’s just being honest.

As part of their effort to “simplify”  the tax code, Republicans want to take away a plethora of deductions and exemptions that allow people to reduce the amount of their income subject to taxes. Many of those benefit rich people, but not all.  

The Tax Policy Center, a liberal-leaning think tank, estimated that while the proposal’s business tax cuts would decrease federal revenues by $2.6 trillion, changes to individual income taxes would actually raise revenues by $470 billion. 

“By 2027, taxes would rise for roughly one-quarter of taxpayers, including nearly 30 percent of those with incomes between about $50,000 and $150,000 and 60 percent of those making between about $150,000 and $300,000,” the center said in its report. The study also found that the richest 1 percent of tax filers would reap nearly 80 percent of the plan’s benefits over 10 years.

(There is no set definition of “middle class,” but in political rhetoric it tends to include a lot of people who are pretty rich ― people earning six figures are in the top 20 percent of U.S. incomes.)

A key tax-code change in the Republican plan would eliminate the “personal exemption,” a break currently available to all filers earning less than about $300,000. The exemption reduces a person’s taxable income by $4,050 for each household member. In the center’s analysis, getting rid of the personal exemption saves $1.5 trillion over 10 years.

Ryan and President Donald Trump have touted a near-doubling of the “standard deduction” as one of the most significant middle-class benefits in their plan. But their proposal to increase that deduction to $24,000 for families wouldn’t make up for the tax benefit that those with several children would lose without the personal exemption. An expanded child tax credit could make up the difference, but Republicans haven’t specified how much they want to increase the credit.

Last week, White House economic advisor Gary Cohn also admitted that not everyone would get a tax cut under the bill.

“I can’t guarantee anything,” Cohn said. “You can always find a unique family somewhere.”

If Republicans wanted to protect every middle-class family from tax hikes, there’s a formula they could follow. The tax cuts passed in the early years of the George W. Bush administration reduced rates for almost everybody and were not offset by any significant revenue increases. The Bush tax cuts didn’t include any “losers,” other than the federal budget deficit.

“Although the middle-class tax cuts were pretty trivial, everybody was a winner,” Larry Zelenak, a tax professor at Duke University Law School, said in an interview. “That had a lot to do with its political viability.”

What he termed “surprising” about the current GOP plan is that “there’s a net tax cut so there are a lot of winners, but there are going to be a lot of losers in the middle class, too.”

Republicans have included tax increases in their plan to reduce the amount of revenue lost from the cuts. Still, the Tax Policy Center estimated the plan would add more than $2 trillion to the national debt over 10 years.

Rep. Kevin Brady (R-Texas), chairman of the tax-writing House Ways and Means Committee, called the center’s report “misleading, unfounded, and biased,” saying it made unreasonable assumptions about policies not specified in the framework released last week.

The center has said it based some of its analysis on previous Republican plans that are broadly similar to the framework.

Arthur Delaney hosts “So That Happened,” the HuffPost Politics podcast: