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Middle-Class Americans Are Getting A Tax Cut In Their Stockings This Christmas

Date: January 12, 2018

Yet Another Promise Kept For President Trump

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TOP TAKEAWAYS

  • President Trump and Congressional Republicans have delivered on their promise to cut taxes for all Americans.
  • Analysis from the JCT, Tax Foundation, and Tax Policy Center all found that the Tax Cuts and Jobs Act will lower taxes for middle-class Americans.
    • Lower middle-class households will see the largest tax cut of all income groups.
  • Small businesses will see a "large" tax break, the NFIB supported the bill saying "This bill will allow millions of small business owners to keep and reinvest more of their money, so they can grow and create jobs."
  • The bill expands the Child Tax Credit and makes more of the credit refundable, enabling the bill to help poor families who don't make enough money to benefit from tax cuts.
  • Republicans in congress and President Trump have been praised for fulfilling one of their major promises to the American people by passing tax reform.

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PRESIDENT TRUMP HAS DELIVERED ON HIS CAMPAIGN PROMISE TO CUT TAXES FOR ALL AMERICANS

When He Was A Candidate, President Trump Promised To Cut Taxes

Then-Candidate Trump Put Forward A Plan In 2015 That Emphasized Tax Cuts For Middle-Class Americans . "Donald Trump unveiled a plan Monday to reduce income-tax rates for lower and middle-income families and corporations that also ends the ability of some investment-fund managers to pay a lower rate than most Americans." (Heidi M. Przybyla, "Donald Trump Promises To Lower Tax Rates For Most Americans,"USA Today , 9/28/15)

President Trump Offered An Economic Blueprint During The 2016 Presidential Campaign That Included Steep Tax Cuts Focused On Stimulating Growth. "Donald Trump offered an expanded economic blueprint and outlined an overhaul of his tax plan on Thursday, but skeptics in both parties questioned his promise to offset steep tax cuts with significantly stronger economic growth. In a speech at the Economic Club of New York, the Republican presidential nominee sought to cast his vision for the economy as the only one focused on boosting growth." (Nick Timiraos and Richard Rubin, "Donald Trump Promises Tax Cuts, Offset By Robust Growth," The Wall Street Journal , 9/15/16)

As A Candidate, President Trump Planned A "Massive Tax Cut." "Trump plans a massive tax cut for individuals and businesses. It's how he would boost America's sluggish growth. But slashing taxes comes at a cost: the government doesn't take in as much money." (Heather Long, "Here's How The 'King Of Debt' Plans To Balance The Budget," CNN , 9/26/16)

Three Major Studies Found That The Tax Cuts And Jobs Act Increases After Tax Income For The Middle-Class

The JCT Released A Distributional Analysis Of The Republican Tax Bill And Found That "The Bill Provides Even Larger Percentage Cuts For Middle Earners Than Previous Versions." "The Joint Committee on Taxation (JCT) has released its distributional analysis of the final Republican tax bill. The bill provides even larger percentage cuts for middle earners than previous versions of the legislation." (Chris Edwards, "Final Tax Bill: Biggest Cuts For The Middle," Cato Institute , 12/19/17)

The Legislation Will Allow Lower Income Earners To Pay A Smaller Share Of The Overall Tax Burden. "If the legislation is enacted, higher earners will pay an even larger share of the overall income tax burden than they do now. Our highly 'progressive' income tax will be even more progressive. That approach is counter to sound fiscal governance and undermines the growth potential of tax reform, but that is what Republicans are delivering." (Chris Edwards, "Final Tax Bill: Biggest Cuts For The Middle," Cato Institute , 12/19/17)

A Tax Foundation Study Found That On A Static Basis "The Tax Cuts And Jobs Act Would Increase The After-Tax Incomes Of Taxpayers In Every Taxpayer Group In 2018." "On a static basis, the Tax Cuts and Jobs Act would increase the after-tax incomes of taxpayers in every taxpayer group in 2018. The bottom 80 percent of taxpayers (those in the bottom four quintiles) would see an average increase in after-tax income ranging from 0.8 to 1.7 percent. Taxpayers in the top 1 percent would see an increase in after-tax income on a static basis of 1.6 percent, driven by the lower pass-through tax rate and the lower corporate income tax." ("Preliminary Details And Analysis Of The Tax Cuts And Jobs Act," Tax Foundation , 12/18/17)

The Liberal Tax Policy Center Found That In 2018, "Taxes Would Decline On Average Across All Income Groups." "In 2018, taxes would be reduced by about $1,600 on average, increasing after-tax incomes 2.2 percent (table 1). Taxes would decline on average across all income groups. Taxpayers in the bottom quintile (those with income less than $25,000) would see an average tax cut of $60, or 0.4 percent of after-tax income. Taxpayers in the middle income quintile (those with income between about $49,000 and $86,000) would receive an average tax cut of about $900, or 1.6 percent of after-tax income." ("Distributional Analysis Of The Conference Agreement For The Tax Cuts And Jobs Act," Tax Policy Center , 12/19/17)

Those In The Middle-Class Will See The Largest Change In After Tax Income

Lower-Middle-Class Households Would See The Largest Tax Cut As A Percentage Of Their Income. "The Republican tax plan would lead to tax cuts for all income groups in 2019, with the lower-middle-class households receiving the largest tax reductions on a percentage basis but upper-income households receiving the most money." (Siobhan Hughes, "Government Analysis Shows 8% Overall Tax Cut In 2019 Under GOP Plan," The Wall Street Journal , 12/18/17)

Those On The Lower And Middle End Of The Income Spectrum Benefit More From The Tax Cuts And Jobs Act. (Amir El-Sibaie, "Who Gets A Tax Cut Under The Tax Cuts And Jobs Act?," Tax Foundation , 12/19/17)

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(Amir El-Sibaie, "Who Gets A Tax Cut Under The Tax Cuts And Jobs Act?," Tax Foundation , 12/19/17)

By Doubling The Standard Deduction Many More Americans Will Simply Take The Standard Deduction, Streamlining The Tax Filing Process

The Tax Cuts And Jobs Act Roughly Doubles The Standard Deduction, Vastly Decreasing The Number Of Filers That Have To Itemize Their Deductions. "For single filers, the bill increases it to $12,000 from $6,350 currently; for married couples filing jointly it increases to $24,000 from $12,700. The net effect: The percentage of filers who choose to itemize would drop sharply, since the only reason to do so is if your deductions exceed your standard deduction." (Jeanne Sahadi, "What's In The GOP's Final Tax Plan," CNN , 12/17/17)

SMALL BUSINESSES WILL SEE SIGNIFICANT TAX RELIEF

The Tax Cuts And Jobs Act Reduces The Tax Burden Of Most Small Businesses

The Tax Cuts And Jobs Act Lowers Taxes For The "Vast Majority" Of Americans And Small Business Owners. "The bill also lowers taxes for the vast majority of Americans, as well as small-business owners - at least until the cuts expire after eight years." (Heather Long, "The Final GOP Tax Bill Is Complete. Here's What Is In It," The Washington Post , 12/15/17)

The Majority Of Pass-Through Businesses Will Be Able To Deduct 20 Percent Of Their Income Tax Free . "In the final GOP bill, the majority of these companies get to deduct 20 percent of their income tax-free, a large reduction that mirrors what was in the Senate bill." (Heather Long, "The Final GOP Tax Bill Is Complete. Here's What Is In It," The Washington Post , 12/15/17)

The National Federation Of Independent Businesses Supported The Bill Saying. "This Bill Will Allow Millions Of Small Business Owners To Keep And Reinvest More Of Their Money, So They Can Grow And Create Jobs." "On Friday evening, December 15, Congress took the next step on tax reform by releasing the conference report of the Tax Cuts and Jobs Act. NFIB supports this bill, and you can read it here. The conference report includes small business priorities such as significant tax relief for pass-through businesses, increased exemption thresholds for the individual Alternative Minimum Tax (AMT) and estate tax, and expanded Section 179 expensing. 'This bill will allow millions of small business owners to keep and reinvest more of their money, so they can grow and create jobs,' said NFIB President Juanita Duggan in a statement." ("Latest Tax Reform News," National Federation Of Independent Businesses , 12/15/17)

THE BILL PROVIDES SIGNIFICANT RELIEF FOR POOR FAMILIES THAT NEED IT MOST

By Increasing The Refundable Portion Of The Child Tax Credit, The Bill Provides Relief To Those Who Would Not Benefit From Standard Tax Cuts

The Bill Makes The Child Tax Credit "More Generous For Low-Income Families.""Thanks to a late push by Rubio and Sen. Mike Lee (R-Utah), the child tax credit would be more generous for low-income families and the working class." (Heather Long, "The Final GOP Tax Bill Is Complete. Here's What Is In It," The Washington Post , 12/15/17)

The Current Child Tax Credit Is $1,000 Per Child, The Tax Cuts And Jobs Act Increases That To A Maximum Of $2,000 Per Child. "The current child tax credit is $1,000 per child. The House and Senate bills expanded the child tax credit, with the Senate going up to a maximum of $2,000 per child. The final bill keeps the $2,000-per-child credit (families making up to about $400,000 get to take the credit)." (Heather Long, "The Final GOP Tax Bill Is Complete. Here's What Is In It," The Washington Post , 12/15/17)

The Bill Also Expands The Refundable Portion Of The Child Tax Credit, Meaning That Families That Don't Earn Enough To Owe Federal Income Tax Will Receive A Check From The Government For Up To $1,400 . "It also makes more of the tax credit refundable, meaning families that work but don't earn enough to actually owe any federal income taxes will get a large check back from the government. Benefits for those families were initially limited to about $1,100, but through changes Rubio and Lee pushed for, it's now up to $1,400." (Heather Long, "The Final GOP Tax Bill Is Complete. Here's What Is In It," The Washington Post , 12/15/17)

Samuel Hammond, A Poverty Expert At The Niskanen Center Said That The Increased Refund "Could Make A Big Difference To Those Earning Under $40,000 A Year." "An average annual tax refund increase of $300 could make a big difference to those earning under $40,000 a year, Hammond said. 'That's the annual cost for diapers for a lot of households. It's not insignificant for a lot of very poor families,' Hammond said. 'People are expecting miracles from a very weak bargaining position. If Rubio hadn't done this, we would have wound up with nothing.'" (Jeff Stein, "What Marco Rubio Got For His Tax Vote," The Washington Post , 12/19/17)

The Bill Also Allows Parents To Claim A $500 Tax Credit For Non-Child Dependents Like An Elderly Parent Or Adult Child With A Disability. "The bill would allow parents to take a $500 credit for each non-child dependent whom they're supporting, such as a child 17 or older, an ailing elderly parent or an adult child with a disability." (Jeanne Sahadi, "What's In The GOP's Final Tax Plan," CNN , 12/17/17)

IN PASSING THE TAX CUTS AND JOBS ACT REPUBLICANS FULFILLED A MAJOR PROMISE TO THE AMERICAN PEOPLE

The Tax Cuts And Jobs Act Is Widely Expected To Restore American Competitiveness And Increase American's After Tax Income

The Tax Cuts And Jobs Act "Fulfills A Major Republican Campaign Promise," And Begins A Return To Growth Oriented Politics. "The tax reform that will pass Congress Wednesday fulfills a major Republican campaign promise, but more important is that it marks a return to the politics of growth after many lean years of envy and income redistribution. It offers hope of broader prosperity after a decade of slow growth and rising inequality." (Editorial, "The Tax Reform Promise," The Wall Street Journal , 12/19/17)

President Trump "Deserves Credit" For Working With Congress To Pass The Agenda That Republicans Ran On. "The victory is also a vindication for these and other Republicans who resisted the advice not to work with President Trump. The GOP is supposedly forever morally tainted by trying to pass the agenda it ran on because Mr. Trump is, well, you know. But voters who elected a Republican Congress want results that are good for the country, and Americans shouldn't suffer for four years because voters preferred Mr. Trump over Hillary Clinton. Mr. Trump deserves credit for selling reform and working with Congress to pass it." (Editorial, "The Tax Reform Promise," The Wall Street Journal , 12/19/17)

Tax Reform Is The Centerpiece Of President Trump's Pro-Growth Agenda And, "A Revised Tax Code Is Expected To Trigger Cascading Waves Of Money For Everybody." "Tax reform has been the holy grail of President Trump's strategy to kick-start the U.S. economy into a higher gear. Under pressure from the president to reach a deal before the Christmas sleigh bells ring, House and Senate Republicans finished knitting together their competing proposals last Friday and Democrats pelted them with mudballs, rocks and whatever else lay at hand. The stage is set for a final House vote on Tuesday, then a vote in the Senate, and finally a White House signing ceremony. The agreement follows a mind-bending process that House Ways and Means Chairman Kevin Brady likens to solving Rubik's Cube. A revised tax code is expected to trigger cascading waves of money for everybody." (Editorial, "Christmas Gift," The Washington Times , 12/18/17)

Millions Of Americans Will See Increases In Their After Tax Income Early Next Year. "The president announced last week that he has instructed the Treasury Department to change the withholding tables by Feb. 1 so that the tax cut appears in people's paychecks right away. Then they will see the Trump tax cut in bigger paychecks will realize that the left has been less than truthful. I asked a cab driver a few weeks ago what he thought of the Trump tax cut and he replied, "Show me the money!" That's exactly what Trump is going to do starting early next year. ‎Something tells me that will make millions of people very happy." (Op-Ed, Stephen Moore, "There Are Zero Excuses To Stand Against The Trump Tax Cuts," The Hill , 12/19/17)

The Tax Cuts And Jobs Act "Will Go A Long Way" To Restoring American Competitiveness In A Global Market, Something That Has Eroded In Recent Years. "All of this will go a long way to restoring American competitiveness that has eroded over several administrations. Even Barack Obama acknowledged this problem, though he declined to do anything lest some large business end up with a tax cut. The same economists who presided over the weakest recovery since World War II now say none of this is needed with the economy finally growing at 3%. But the faster growth never materialized when they were in power, and this expansion has been notable for slow business investment and weak productivity growth." (Editorial, "A Tax Reform For Growth," The Wall Street Journal , 12/15/17)