In this video, we highlight six common — and inaccurate — claims from Republicans and Democrats about the GOP tax plans. The House and Senate have both passed their versions of tax legislation, and the differences in the two bills now need to be reconciled in a conference committee.
Will the tax overhaul benefit President Trump? The president has claimed that the tax changes won’t benefit him, even saying in one speech that the plan would “cost me a fortune.” Trump has offered no proof of that — and he has refused to release his tax returns. But it’s highly unlikely that he’d pay more in taxes. Several provisions of the plans would benefit wealthy individuals like Trump, including changes to the estate tax, the tax rate on pass-through business taxes and the alternative minimum tax.
For more, see: “Trump Likely Benefits from Tax Bills,” Nov. 30
Is this the largest tax cut in history? Trump also has claimed, repeatedly over the past several months, that the tax cut would be the “biggest tax cut in the history of our country.” That’s false. The original House bill, as we wrote, would have been the eighth largest cut since 1918 as a percentage of gross domestic product, and the fourth largest in inflation-adjusted dollars. The Committee for a Responsible Federal Budget illustrates in charts how the plan compares with past tax cuts. The recent House and Senate versions of the tax plan would cost about the same as the original legislation, according to Joint Committee on Taxation estimates. So the GOP plan still isn’t the “biggest” tax cut in history.
Does the tax plan raise or cut taxes for the “middle class”? House Minority Leader Nancy Pelosi has claimed the bill is a tax hike for “millions of middle-class families,” while President Trump has said it’s a “middle-income tax reduction.” Which is it? Both. There will be winners and losers under the plan.
Under both the Senate and House plans, most of the middle 20 percent of income earners would see a tax cut through 2025. In the first few years, only 10 percent in the middle quintile would see a tax increase, according to the Tax Policy Center. (Those in the middle quintile earn between $48,601 and $86,100 in 2018 in expanded cash income, which is pretax income that also includes employee and employer contributions to health insurance and tax-preferred retirement accounts, retirement account income, non-taxable Social Security and pension income, employer share of payroll taxes, and food stamps.) In 2027 under the House bill, 30 percent in that quintile would see a tax increase, and in 2025 under the Senate bill, 12 percent see higher taxes, compared with current law. Most would pay higher taxes after that under the Senate bill, because individual income tax provisions expire in 2025.
For more, see: “GOP, Democrats Spin Tax Plan,” Nov. 3
Is the tax plan a “job killer”? Pelosi says so. Her office cites Democratic economists who say the corporate tax changes in the GOP plans would encourage U.S. multinational corporations to ship jobs overseas. But most economic analyses of the GOP tax plans project that, on balance, they would create modest job growth.
Moody’s Analytics forecasts the plans will create about 500,000 to 600,000 net new jobs over 10 years — although at a steep cost to the nation’s debt. The business-backed Tax Foundation says the Senate plan would result in 925,000 additional full-time equivalent jobs. Even Jared Bernstein, one of the economists cited by Pelosi’s office, said he expects “minimal job growth, but a net plus.” After Pelosi made her claim, the Joint Committee on Taxation issued a report on the economic impact of the Senate tax bill that projected an increase in employment of about 0.6 percent over 10 years compared with current law.
For more see: “Pelosi’s Misleading ‘Job-Killer’ Claim,” Nov. 29
Who pays the estate tax? House Ways and Means Committee Chairman Kevin Brady introduced the House bill, which would eliminate the estate tax. He claimed that “my belief is it isn’t paid by the super wealthy. It’s burdened by our family-owned farms and businesses who worked a lifetime to build up a nest egg.” But the estate tax only falls on estates with assets of more than $5.49 million for an individual and nearly $11 million for a couple.
Fewer than 5,000 people had to pay an estate tax in 2015, according to IRS data, and 5,219 paid it in 2016. As for farms, 682 estates in 2016 that listed any farm assets had to pay the estate tax, and 124 of those had assets of $20 million or more.
Will the tax plan increase “middle-class” wages by $4,000? Trump repeatedly has made the dubious claim that cutting corporate taxes from 35 percent to 20 percent would increase wages for “middle-class families” by $4,000. Don’t count on it.
The White House Council of Economic Advisers says average households (those that earned $83,143 in 2016) would see their incomes increase by $4,000 after eight years — if the nation’s real gross domestic product grows at a robust rate of between 3 percent and 5 percent annually. But nonpartisan congressional economists don’t expect that to happen. The Congressional Budget Office projects an annual growth of 1.9 percent over 10 years, from 2017 to 2027, and the Joint Committee on Taxation says the Senate tax plan would increase economic growth by only 0.8 percent on average over that time period. The annual real GDP hasn’t increased by 3 percent since 2005 and by 5 percent since 1984, according to the Bureau of Economic Analysis.