Arctic National Wildlife Refuge Drilling
The Act contains provisions that would open 1.5 million acres in the Arctic National Wildlife Refuge to oil and gas drilling. This major push to include this provision in the tax bill came from Republican Senator Lisa Murkowski. The move is part of the long-running Arctic Refuge drilling controversy Republicans had attempted to allow drilling in ANWR almost 50 times. Opening the Arctic Refuge to drilling “unleashed a torrent of opposition from conservationists and scientists.” Democrats and environmentalist groups such as the Wilderness Society criticized the Republican effort.
Many More Families Could Lose Under Hidden Parts Of The Plan
The Trump one-pager was silent on a wide array of tax provisions that benefit middle-class and working families. But many of these provisions could be on the chopping block in tax reform. In fact, the White House has said that Any other deduction a person or business takes today is subject to potential elimination.15 And given that the specified tax cuts in Trumps plan dig at least a $3 trillion hole, Trump and Congress would have to eliminate many tax benefits for the middle class to make the plan come anywhere near adding up. During several months, Trump officials made the ludicrous claim that their tax cuts will pay for themselves through stronger economic growth.16 But no serious economist believes that, and the Trump administration has been widely criticized not only for relying on highly dubious economic forecasts in its budget, but for double counting the resulting revenue.17 Administration officials are now saying that they will partly or fully offset the cost of the proposed tax cuts by broadening the tax basethat is, by eliminating deductions, exclusions, and credits.
All Income Groups Get Cuts Early On But Not ‘everyone’
As a presidential candidate, Donald Trump pledged to make everyone better off from a tax perspective.
“Everybody is getting a tax cut, especially the middle class,” Trump said in an interview during the campaign.
On Dec. 19 and 20, the Senate and the House passed the final version of the tax bill, which will go to the president for his signature.
The bill does give a lot of Americans a tax cut, at least in the early years after passage. But at no point does “everybody” get one.
As we’ve noted before, every income group on average would pay less in taxes in 2019, according to a nonpartisan analysis of the final tax bill by Congress’Joint Committee on Taxation.
But this doesn’t mean that every single taxpayer in each income group will get a tax cut. However, at least early on, there will be far more winners than losers in every income group. For all but the top 1 percent of earners, no income group studied by the Urban Institute-Brookings Institution Tax Policy Center has more than 7.6 percent of its members losing ground under the tax bill in 2018.
Over time, these broad-based tax cuts dissipate, however, due to the sunsetting of some key tax credits and a change in how inflation is calculated.
That’s a significantly different pattern than in the bill’s early years.
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Trumps New Capital Gains Tax Proposal Would Give 99 Percent Of Its Benefits To The Top 1 Percent
President Trump has recently floated a proposal to cut the top capital gains ratea tax paid on the profit received from selling a capital asset such as stocks, bonds, or propertiesfrom 20 percent to 15 percent. Capital gains taxes already receive preferential tax treatment compared with ordinary income from wages or salaries. According to IRS data from 2018, only the wealthiest 0.8 percent of Americans had any capital gains or dividends in the current 20 percent tax bracket. As such, cutting the top rate on these assets would almost exclusively benefit the wealthy. The Institute on Taxation and Economic Policy estimates that a full 99 percent of the tax cut would go to the richest 1 percent.
The uber-wealthy within the top 1 percent would see the largest benefits from each of these two policies. According to a Center for American Progress analysis based on 2017 tax data, if the top capital gains rate were reduced to 15 percent and the net investment income tax were repealed as part of the Trump administrations efforts to repeal the ACA, the highest-income 0.001 percent of Americansthose with incomes exceeding $63.4 million per yearwould receive a windfall of nearly $14 billion: an average tax cut of more than $9.6 million per person.
The Promise: It Will Be A Middle
Our framework ensures that the benefits of tax reform go to the middle class, not to the highest earners. President Trump, Oct. 11, 2017
The rich will not be gaining at all with this plan. President Trump, Sept. 13, 2017
Source: Institute on Taxation and Economic Policy , TCJA by the Numbers, 2020.
The richest 1% of taxpayers will get an average tax cut of $50,000 in 2020 from the Trump-GOP tax cuts. Thats over 75 times more than the tax cut for the bottom 80% of taxpayers, which will average $645.
These figures are comparable to estimates from the Tax Policy Center for 2018, which found the average tax cut for the richest 1% to be $51,000 and the average tax cut for the bottom 80% to be about $800.
Source: ITEP, TCJA by the Numbers, 2020.
In 2020, the richest 1% will receive a total of $78 billion in tax cuts from the Trump-GOP tax lawmore than a quarter of the total. Thats about the same amount as the bottom 80% of taxpayers will get.
Source: ITEP, TCJA by the Numbers, 2020.
The Trump-GOP tax cuts disproportionately benefit white Americans at the expense of other racial groups. In 2020, whites will make up 67% of tax filers but will garner 79% of the tax cuts. On the other hand, African Americans will comprise 10% of all filers yet only receive 5% of the benefits. Latinx will be 12% of filers but get only 7% of the tax savings.
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Who Used The Qbi Deduction In 2018
Trumpâs tax reform created the qualified business income deduction . You donât need to itemize to take the QBI deduction and itâs available for taxpayers who have certain types of business income or who earned dividends from certain types of investments .
That means if you make money from certain types of investments, you can pay less on your income taxes thanks to the QBI deduction. Taxpayers across all income ranges did claim the deduction, but high-income taxpayers claimed the QBI deduction more frequently and received more on average.
Nationally, the average QBI deduction was $7,947 in 2018. Of tax returns with an AGI of less than $100,000, only 8.8% claimed the QBI deduction. The average value of their deduction was $2,134. Tax returns with AGI of $100,000 or more claimed the QBI deduction nearly one third of the time for an average deduction of $15,222. Moving up the income ladder, nearly half of all tax returns with AGI of at least $250,000 claimed the QBI deduction in 2018, and got an average deduction of $36,455.
Estate Tax Changes Help High
Estate taxes apply to the value of a personâs estate when that person passes away. Estates are only subject to estate tax if theyâre worth at least a certain value, known as the estate tax exemption. The Tax Cuts and Jobs Act doubled the exemption from $5.49 million in 2017 to $11.18 million in 2018. That means only very wealthy estates have to pay estate tax. The estate tax exemption is also set to increase every year as of 2020, the exemption is $11.58 million.
The number of estate tax returns decreased slightly from 2017 to 2018, but the total value of estate taxes collected by the IRS in 2018 was 3.8% higher than in 2017. It’s unclear from currently available data if this increase is due to the TCJA, or if it’s simply variation from one year to the next. Future IRS data should provide more clarity.
Itâs worth noting that Trumpâs tax reform did not change the actual estate tax rates. It only increased the exemption so that fewer estates would have to pay the tax, even though few estates had to pay the tax in the first place.
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Just 6% Spent On Workers
The tax hike was sold to citizens as a move that would boost the economy, add jobs and hike wages. The president said in one speech that it would bring the average American household around a $4,000 pay raise.
Seizing on that, the Communications Workers of America, a 700,000-member union, asked eight major corporations to sign a pledge to hike worker wages by $4,000 a year if their tax rate was cut to 20%, the initial proposed rate. The companies balked and signed nothing.
Still, big business got what it wanted.
The bill signed into law by Trump on 22 December 2017 cut the corporate tax rate from 35 to 21%, the largest such rate cut in US history. The most excited group out there are big CEOs, said the White House economic adviser Gary Cohn as the measure was making its way through Congress in 2017.
But the fears of ordinary workers in regard to those promised higher wages were realized.
The bulk of the $150bn the tax cut put into the hands of corporations in 2018 went into shareholder dividends and stock buy-backs, both of which line the pockets of the 10% of Americans who own 84% of the stocks.
Just 6% of the tax savings was spent on workers, according to Just Capital, a not-for-profit that tracks the Russell 1000 index.
In the first three months after the bill passed, the average weekly paycheck rose by $6.21. That would be $233 a year.
Among the investigations other key takeaways:
The Trump Campaigns Scenario
In a TV ad that has aired in eight states, the Trump campaign claims that the Republican presidential candidates tax plan includes a 30 percent tax cut for working people.
When we asked the campaign about the claim, a spokesman pointed to a specific scenario the campaign has cited before: A married couple earning $75,000 per year with two children and $10,000 in child care expenses.
On the campaign trail, Trump has come closer to making that specific claim. In talking about what he has recently called the Middle Class Tax Relief and Simplification Act, Trump said at a rally in Sanford, Florida:
Trump, in Sanford, Florida, Oct. 25: So essentially a middle-class family with two children will get about a 35 percent tax reduction. Isnt that nice? Its about time. The middle class in our country has been devastated. And by the way, crooked Hillary wants to raise your taxes up to the sky. She wants to raise. We are the highest taxed nation in the world. She wants to raise your taxes right up to the sky.
The same day in Tallahassee, Trump also saidthe tax reduction will give a middle-class family with two children a basic break of 35 percent.
If we assume one spouse earns all of the $75,000 and both kids are older than 5 but younger than 13, we get a 43 percent federal income tax reduction using the Tax Policy Centers tax calculator and a 45 percent reduction using the Tax Foundations calculator.
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Did Trumps Tax Cut Improve The Economy
One major reason that President Trump said he wanted to pass his tax plan was to improve the economy. He believed there would be more business investment, which would stimulate the economy and, in turn, help working Americans.
On the basis of the stock market and gross domestic product , the economy is in fact performing very well. But those trends already existed before the TCJA became law. The unemployment rate â 3.5% in February 2020 â has reached its lowest level in more than 50 years, but data from the U.S. Bureau of Labor Statistics shows that unemployment has been steadily declining since 2010. There isnât currently enough evidence to show that Trumpâs tax cuts lowered the unemployment rate more quickly. Preliminary data from the U.S. Bureau of Economic Analysis , released in February, also suggests that GDP has actually been slowing as of late.
Along with the U.S. bringing in less tax revenue since Trumpâs tax reform, the U.S. deficit has increased significantly. Data from the Federal Reserve Bank of St. Louis shows that the federal deficit grew 17% from 2017 to 2018 and 26% from 2018 to 2019. Federal debt passed $1 trillion in 2019 and the Congressional Budget Office expects the deficit to average $1.4 trillion from 2021 to 2030. Whether the size of the deficit should matter is an issue still being debated by economists, but itâs clear that Trump himself expected his tax cuts to not just lower the deficit but pay it off entirely.
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What’s Wrong With The Status Quo
People on both sides of the political spectrum agree that the tax code should be simpler. Since 1986, the last time a major tax overhaul became law, the body of federal tax lawbroadly definedhas swollen from 26,000 to 70,000 pages, according to the House GOP’s 2016 reform proposal. American households and firms spent $409 billion and 8.9 billion hours completing their taxes in 2016, the Tax Foundation estimates. Nearly three-quarters of respondents told Pew four years ago, that they were bothered “some” or “a lot” by the complexity of the tax system.
The Pew Research Center reported in early April 2019 that there is a growing partisan divide over the perceived fairness of the tax system in America.
An even greater proportion was troubled by the feeling that some corporations and some wealthy people pay too little: 82% said so about corporations, while 79% said so about the wealthy. While the new tax law cuts a number of itemized deductions, most of the loopholes and giveaways that were slated for repeal in earlier bills have been retained in some form.
The individual tax rate schedule, which Trump would have cut to three brackets, remains at seven. In other words, this legislation may do relatively little to simplify the tax code. The other issues that the Pew survey indicates that bother people the mosttaxes for wealthy individuals and corporationsare likely to be exacerbated by the law.
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Workers Barely Benefited From Trumps Sweeping Tax Cut Investigation Shows
Big companies drove the 2017 Tax and Jobs Act, but did not commit to any specific wage hikes, the Center for Public Integrity found
Big companies drove Donald Trumps tax cut law but refused to commit to any specific wage hikes for workers, despite repeated White House promises it would help employees, an investigation shows.
The 2017 Tax and Jobs Act the Trump administrations one major piece of enacted legislation did deliver the biggest corporate tax cut in US history, but ultimately workers benefited almost not at all.
This is one of the conclusions of a six-month investigation into the process that led to the tax cut by the Center for Public Integrity, a not-for-profit news agency based in Washington DC.
The full findings, based on interviews with three dozen key players and independent tax experts, and analysis of hundreds of pages of government documents, are .
