House Speaker Paul Ryan (R-WI) has been rolling out his “Better Way” agenda, a slate of proposals meant to offer new ideas from the Republican Party to benefit the country, over a number of weeks. The final plank was a tax plan full of recycled conservative ideas.
And now two analyses show that no matter how one looks at it, the package of tax reforms would overwhelmingly help the wealthy the most and leave little for everyone else.
The first analysis from Citizens for Tax Justice (CTJ), a left-leaning think tank, found that the top 1 percent of American earners make off with the biggest tax cut by far. Those in this rarified slice of the income scale would see an 8 percent increase in their after-tax income if the House Republicans’ tax plan were implemented, or an average of an extra $137,780 each. That represents a 60 percent cut of all the benefits the Republicans offer to individuals.
The poorest 20 percent of the country, on the other hand, would see income increase by just 0.7 percent, or $107. The middle class fares no better, with the middle 20 percent getting just a 1.5 percent bump, or $753. No group, under CTJ’s analysis, would get a more than 1.5 percent increase except for the top 1 percent.
Even a more sympathetic group comes to the same conclusion. The Tax Foundation, a conservative think tank, found in its own analysis that on a static basis — not taking into account any assumptions about potential economic or wage growth from cutting taxes — the bottom 80 percent of Americans would see a marginal increase in income, ranging between 0.2 percent to 0.5 percent. Only those in the top 20 percent of income earners would see a 1 percent increase, while the top 1 percent would get a 5.3 percent boost.
The Tax Foundation also includes a “dynamic” analysis, or one that purports to take into account potential positive effects from the massive tax cuts on the economy. But those assumptions about future economic performance are difficult to make accurately, and there is little evidence that tax cuts benefit growth.
Even with these shaky assumptions, however, the Tax Foundation still concludes that the benefits skew to the rich. The bottom 80 percent would see an increase of anywhere from 8.4 to 9.1 percent, while the top 1 percent would make off with a 13 percent bump.
Ryan and the other Republican lawmakers who helped craft the plan have claimed that it won’t raise the deficit. But neither analysis comes to that conclusion. Both find that the tax package would cost the government, although the full amount depends on the assumptions made.
CTJ, which doesn’t use a dynamic model, finds the plan would cost $4 trillion over a decade, mostly due to a big reduction in corporate taxes. The Tax Foundation found that on a static basis, with no baked-in assumptions, the plan would cost $2.4 trillion over a decade. That figure is significantly reduced when the group assumes that the package would increase GDP by 9.1 percent, wages by 7.7 percent, and jobs by 1.7 million — coming in at $191 billion. That kind of GDP growth hasn’t been seen in decades; the economy grew by 3 percent, on average, between 1969 and 2007. Even so, the plan still comes at a significant cost even if those things come to pass.