It’s Tax Day 2018, and you know what that means? The country’s wealthiest Americans are about to experience long-term gains from the Tax Cuts and Jobs Act. The Pennsylvania Budget and Policy Center is concerned about the effects of the tax cut law and legislation that would make temporary tax cuts permenant after 2025.
A new report from the Institute of Taxation and Economic Policy shows that the top 1% will receive more federal tax dollars than the bottom 60% in 47 states, and the top 20% will gobble up the majority of returns from the temporary tax provisions that were baked into the bill as tax cuts for the middle class. The top 20% will also receive a larger and more disproportionate tax cut in relation to their income.
The report published by the Institute of Taxation and Economic Policy explains that those in the top 20% income bracket will largely benefit from the extension of the temporary provisions that are set to expire at the end of 2025. These temporary provisions were meant to benefit low and middle-income Americans. Once these provisions expire, low and middle income would see their taxes increase in 2026. Lawmakers are now looking to make these temporary provisions permanent, but the wealthy will benefit the most.
According to the report, the top 20% of Americans will receive tax cuts that a large in relation to their income than what other Americans would receive. The top 20% of Americans will also “receive 71 percent of the benefits of the law in 2018,” and continues “this same group would receive 65 percent of the benefits of an extension of the temporary provisions in 2026 and would receive 71 percent of the benefits of the proposed extension combined with TJCA as already enacted.” A closer look shows that the richest 1% will take 24% of benefits in 2018.
In Pennsylvania, the top 1% will get 26% of the benefits and the top 20% of residents will get 73% of benefits, while the bottom 60% will only get 12% of all benefits.
The Center on Budget and Policy Priorities published a map using data from the ITEP report that shows how the one percenters benefited compared to the bottom 60% of American households that were left out. The top 1% of households in 47 of 50 states will receive more dollars from the federal tax cuts than the bottom 60% of households. The states where the bottom 60% will receive more than the top 1% are: California, New Jersey and New York.
The Center on Budget and Policy Priorities also points out that the tax cuts will impact state budgets and coffers. The new tax cuts will add $1.5 trillion to the federal deficit over the next ten years. This may prompt cuts to public services and federal assistance programs, which may then prompt states to cut these programs in their budgets.
While there are some provisions of the Tax Cuts and Jobs Act that may benefit low and middle-income Americans, the new tax cuts bill will largely make income inequality between the top 1% and the bottom 60% even worse. The legislation will create a deficit, which may then prompt more cuts to health care and assistance programs on the state and federal levels. On top of that, temporary extensions that would be made permanent will almost exclusively allow the wealthiest of Americans to prosper.