Trump-GOP Tax Plan in Five Charts
Provisions will have huge impact on Wisconsin taxpayers.
New details about the tax plan being advanced by President Trump and Republican leaders in the U.S. House of Representatives show that the plan would mostly benefit the extremely rich, despite initial claims by proponents that it would be targeted at members of the middle class.
Provisions included in the tax framework include:
- Reducing the corporate income tax rate from 35% to 20%;
- Eliminating the Alternative Minimum Tax, which insures that wealthy individuals pay at least some level of federal income tax;
- Eliminating the estate tax. Currently, only estates of more than $5.5 million for individuals or $11 million for couples pay any estate tax;
- Reducing the number of income tax brackets;
- Doubling the amount of the standard deduction and eliminating the personal exemption; and
- Ending the deduction for state income taxes, and capping the deduction for local property taxes.
Republican leaders released the details of the plan earlier this month, allowing the Institute for Taxation and Economic Policy to model how the provisions would affect taxpayers in different states. Here are five charts that show how the Trump-GOP tax framework would affect Wisconsin taxpayers:
1. The top 1% of earners in Wisconsin would get 47% of the value of the tax cut. The proposed tax cut is so tilted that 47¢ out of every $1 of the tax cut would go to the top 1% by the time the tax plan is fully phased in in 2027. That top 1% has an average income of $2.5 million.
The remaining 99% of Wisconsin taxpayers would share the other 53% of the value of the tax cut. The bottom 60% of taxpayers, who have incomes of less than $95,000, would receive a paltry 15% of the total value of the tax cut.
2. Wisconsin taxpayers in the top 1% would receive an average tax cut of more than $81,000 by the time the tax plan is fully phased in – enough to lay out cash sufficient to buy a Porsche or a Maserati. Taxpayers in other income groups would receive much less, with some average tax cuts of a size more appropriate to buying a spiffy set of car seat covers.
The average tax cut received by the top 1% would be more than 800 times larger than the average tax cut received by Wisconsin taxpayers in the bottom 20% by income. That means that taxpayers in the top 1% would save more in taxes in the equivalent of eleven hours than people in the bottom 20% would save all year long.
(By the way, that $81,300 average tax cut for taxpayers in the top 1% is enough to cover the average yearly healthcare costs for 46 kids in Wisconsin.)
3. Even taking into account relative income size, the top 1% would get a much larger tax cut than everyone else.
Measured as a share of income, Wisconsin residents with the highest incomes would receive the largest tax cut. Their tax cut would amount to 3.3% of their income on average, three times as large as the tax cut of 1.0% of income that taxpayers with slightly lower incomes would receive. The other income groups would receive tax cuts as a percent of income that range between 0.4% and 0.9%.
4. and 5. The Trump-GOP House tax framework could result in an income tax hike for a sizeable share of Wisconsin taxpayers. One out of every seven taxpayers in Wisconsin would actually pay more in taxes under this plan when it is fully phased in, in part because the deduction for state income taxes is eliminated. For taxpayers in the very middle, a full one-fifth would pay higher federal taxes under the GOP House plan.
The share of taxpayers who will lose out under the tax plan is much higher if one considers how the plan will be paid for. As the Center on Budget and Policy Priorities points out: “Sooner or later, the cost [of the plan] will need to be offset through some combination of spending cuts and tax increases.” For most Americans, the spending cuts and tax increases needed to offset the cost of the Trump-GOP House tax cuts would cause their incomes to fall more than they would gain from the tax cuts. In fact, every income group in the bottom 95% of the spectrum by income would be net losers on average, while the top 5% by income would be net winners.
For more information: Vast Majority of Americans Would Likely Lose From Senate GOP’s $1.5 Trillion in Tax Cuts, Once They’re Paid For, Center on Budget and Policy Priorities, October 4, 2017.