Wealthiest To Benefit From Half Of Total US Tax Cuts: Study
The recently proposed US tax reform package would benefit the rich but see some middle-class households face higher tax rises, says a new state-by-state analysis from the Institute on Taxation and Economic Policy (ITEP).
Released on October 4, the report found that the new framework would benefit the wealthiest taxpayers in every state, defined as those with annual incomes over USD615,800.
“In all but a handful of states, at least half of the tax cuts would flow to the richest one percent of residents if the framework took effect,” said ITEP. “Nationally, more than two-thirds (67 percent) of the tax cuts contained in the framework would go to the richest one percent of Americans in 2018.”
In comparison, middle-class households earning between USD41,000 and USD66,000 would receive an average tax cut of USD410, increasing their incomes by 0.8 percent. “In no state is this group the focus of the framework’s benefits,” said the report. “In fact, many households in the middle- and upper-middle portions of the income distribution would see their tax bills rise under the framework.”
In total, ITEP estimates that around one in six Americans (16.7 percent) could see their tax bills increase in 2018 should the proposal be implemented in its current form. Overall, taxpayers with incomes between USD111,000 and USD241,000 would be the most likely to face a tax increase, with nearly 42 percent of this group paying more.
However, the impact varies widely between states. In nine states (Washington DC, Maryland, New Jersey, Connecticut, California, Virginia, Utah, New York, Massachusetts, and Georgia) over 20 percent of taxpayers would see an immediate increase in their taxes, primarily due to the repeal of state and local tax deductions.
“The dramatic reduction in itemized deduction benefits is key to understanding why so many middle- and upper-middle income families would see their tax bills rise under the framework,” warned the report.
The wealthiest households, although also negatively impacted by the repeal and reduction of deductions, would benefit from tax cuts that offset this impact.
“The framework would be particularly beneficial to households with incomes exceeding USD1m,” said ITEP. “These households account for just half of one percent of the US population but would receive 58.6 percent of the tax cuts.”
