U.S. Rep. Lloyd Doggett, D-Austin, told congressional colleagues that President Donald Trump’s plan to cut taxes would mostly benefit America’s wealthiest.
“Eighty percent of the tax breaks in this proposal go to the top 1 percent — that is, people making more than $730,000 a year,” Doggett said on the House floor.
Doggett made his claim three days after Republicans announced their framework for tax system with just three tax brackets, at tax rates of 12 percent, 25 percent and 35 percent, down from the current seven tax brackets.
For personal income-tax filers, the framework calls for doubling the standard income-tax deduction while repealing most itemized deductions, including personal exemptions for dependents.
The framework further says that the House Ways and Means Committee and Senate Finance Committee “will work on additional measures to meaningfully reduce the tax burden on the middle-class.” Put another way, the legislation itself had yet to debut.
Doggett, asked the basis of his claim, pointed to an Associated Press news story citing a preliminary review of the framework by the nonpartisan Tax Policy Center, a joint venture of the Urban Institute and the Brookings Institution. According to the AP report, the center found “that about 80 percent of the tax benefit would go to the top 1 percent — with income above $730,000 annually — by 2027.”
We confirmed that’s what the center’s analysis concluded for the year 2027. However, the center pegs the top-1-percent income figure for 2027 at $912,100 in 2017 dollars; it separately lists $730,000 as what the top 1 percent would earn in 2018 when about half the benefits would flow to the top 1 percent, the analysis says.
Generally, experts told us that no other reports on the plan’s effects on taxpayers became public before Doggett spoke. A few days later, though, the Institute on Taxation and Economic Policy — a research group that partners with Citizens for Tax Justice, which advocates for the tax interests of middle- and lower-class families — predicted that in all but a few states, at least half the framework’s tax cuts would flow to the wealthiest 1 percent of residents.
Let’s get to details in the Tax Policy Center’s analysis.
For starters, the center’s estimates presume that the plan would take effect in 2018 and would decrease federal revenue by $2.4 trillion over 10 years.
“In 2018,” the analysis says, “all income groups would see their average taxes fall, but some taxpayers in each group would face increases. Those with the very highest incomes would receive the biggest tax cuts.”
According to the center’s estimates, the top 1 percent of Americans would get 53 percent of the plan’s benefits at the start and reap 79.7 percent of the benefits in its 10th year, 2027.
Under the plan, the center says, the number of taxpayers paying more in taxes would generally rise over time. “This is because the plan would replace personal exemptions, which are indexed for inflation, with additional credits for children and non-child dependents that are not indexed for inflation,” its analysis says. “In addition, indexing tax brackets and other parameters to the slower-growing chained Consumer Price Index means that over time more income is subject to tax at higher rates.”
A center researcher, Joe Rosenberg, advised that the conclusion that the wealthiest Americans would reap more of the tax benefits in the 10th year traces to other Americans bearing more tax losses as a result of losing itemized deductions, especially deductions for paying state and local income taxes. Rosenberg also singled out the proposal to end the personal exemption, indexed for inflation, with a child tax credit not indexed for inflation.
After the center posted its analysis, a White House adviser, Kevin Hassett, chairman of the Council of Economic Advisers, questioned the validity of the projections given multiple assumptions made by the center. Rosenberg, asked about that critique, pointed out that the center’s analysis says up front that many aspects of the framework “were unspecified or left to be determined by the tax-writing committees in Congress.”
Doggett said “80 percent of the tax breaks in” President Trump’s framework tax-cut “proposal go to the top 1 percent, that is, people making more than $730,000 a year.”
The analysis Doggett referenced indeed indicates benefits will accrue to the very wealthy over time. Yet in the first year of changes, the top 1 percent are projected to draw a little over half the tax savings. The threshold of 80 percent going to the top 1 percent is projected for the 10th year. Also, Doggett’s stated figure for incomes is too low; it ties to the first year of implementation.
We rate Doggett’s statement Half True.
U.S. Rep. Lloyd Doggett
Statement: “80 percent of the tax breaks in” President Donald Trump’s tax cut “proposal go to the top 1 percent, that is, people making more than $730,000 a year.”