SUBSCRIBE TO OUR FREE NEWSLETTER
Daily news & progressive opinion—funded by the people, not the corporations—delivered straight to your inbox.
5
#000000
#FFFFFF
5
#000000
#FFFFFF
child tax credit
Unpacking the House’s Highly Regressive Tax Plan
Figure 1
Differences in the average tax cut provided to each group would be dramatic, with the cuts rising significantly alongside income, as seen in Figure 2. While working-class families (defined here loosely as the bottom 40% of earners) could expect an average tax cut of $361 in 2027, the nation’s highest-income families (defined as the top 0.1%) would receive an average tax cut of at least $255,670 in that year. In reality, the average tax cut for affluent families is likely to be somewhat larger than this, as the JCT’s distributional figures do not include the bill’s estate tax cuts benefiting people with multimillion-dollar estates.
These figures also do not include other potential costs to families likely to be included in the bill, such as deep cuts to Medicaid and food assistance. The Congressional Budget Office recently predicted that the bill would put the nation on a path toward a future where 13.7 million fewer people would have health coverage. Of that amount, 8.6 million would lose coverage as a direct result of provisions contained in the bill, especially those slashing Medicaid. Another 5.1 million would lose coverage because of the expiration of temporary enhancements to the Affordable Care Act premium tax credits which, contrary to what we have seen in past Congresses, this current Congress appears to have no interest in making room for in its legislation.
Figure 2
The JCT has also published extremely detailed estimates of the revenue impact of most provisions in the bill. Exploring those estimates yields additional insights into the bill’s most significant changes.
The JCT estimates are reported in a way that mirrors the sorting of the bill itself, which is understandable given the JCT’s role in this debate. Unfortunately, however, the bill’s organizational structure is far from intuitive, and that makes it difficult for observers to understand the overall effects of this legislation.
One of the more remarkable takeaways from the JCT’s revenue estimates is just how insignificant the tax provisions discussed most during the last presidential campaign—especially tax breaks for tips, overtime, car loan interest, and senior citizens—are in the broader context of this very large bill.
The section of the bill titled “Make Rural America and Main Street Grow Again,” for example, includes everything from cutting taxes on multinational corporations’ offshore profits to repealing an excise tax on indoor tanning services. Similarly, the section titled “Make America Win Again” includes provisions as varied as scrapping tax credits that help homeowners purchase more energy efficient furnaces, significantly raising taxes on nonprofit foundations and colleges, and eliminating taxes on firearm silencers.
By sorting the JCT’s revenue estimates into more intuitive categories, we can gain a better understanding of how the bill would reshape our tax code. As seen in Figure 3, the bill includes $7.7 trillion in gross tax cuts over the next decade, before considering various offsetting tax increases discussed below. It bears noting that this $7.7 trillion tax cut would be significantly higher if the many temporary provisions in the bill were to be extended, as many lawmakers certainly hope.
Figure 3.
The largest single item in the JCT’s revenue estimates is a reduction in tax rates, which disproportionately benefits high-income earners and plays an important role in the overall regressive tilt of the bill. Other significant regressive tax cuts include a watering down of the Alternative Minimum Tax (AMT), which was designed to ensure that high-income earners pay some minimum amount of tax, as well as a variety of business tax cuts and a substantial estate tax cut on the transfer of extraordinary amounts of wealth from one generation to the next.
Other notable tax cuts include an increased standard deduction and Child Tax Credit (CTC), though it is important to recognize that these cuts are largely offset by certain tax increases affecting broadly similar policies. As seen below in Figure 4, the single largest revenue-raiser in the bill is repeal of personal and dependent exemptions that, prior to 2018, served a purpose very similar to the higher CTC and standard deduction amounts available today. This fact is important to understanding why the bulk of the more progressive tax cuts in the bill are illusory, and why the overall bill tilts regressive despite the presence of these isolated progressive features. According to the JCT score, almost 90% of the tax cuts associated with increasing the standard deduction and the Child Tax Credit are offset by tax increases associated with repealing personal and dependent exemptions.
In total, the bill contains $3.9 trillion in gross tax increases over the next 10 years, which are sorted into broad categories in Figure 4. When combined with the $7.7 trillion in gross tax cuts shown above, the net tax cut amounts to $3.8 trillion over the coming decade.
Figure 4
Aside from repealing personal exemptions, the most important revenue-raisers in the bill are the repeal or reduction of a variety of tax provisions meant to help accelerate the nation’s transition to a green energy economy, the paring back of premium tax credits meant to help families afford health insurance, and the extension of caps on the amount of state and local tax (SALT) that taxpayers—especially those living in blue states with more robust income and property taxes—can write off on their federal tax forms. In fairness, some of the tax increase associated with SALT shown in Figure 4 can be thought of as an offset to the AMT cuts shown in Figure 3, as the AMT functioned partly as a limitation on SALT deductions.
One of the more remarkable takeaways from the JCT’s revenue estimates is just how insignificant the tax provisions discussed most during the last presidential campaign—especially tax breaks for tips, overtime, car loan interest, and senior citizens—are in the broader context of this very large bill. These core features of the Trump campaign’s platform, which continue to dominate much of the debate over taxes today, come at a total cost of $293 billion. While that amount is not trivial, it equals just 3.8% of the $7.7 trillion gross tax cut being offered under this bill. The tax cuts being offered to businesses, by contrast, are more than four times larger.
The low price tag attached to the highest-profile tax changes is partly due to their limited reach (most Americans do not receive tips or overtime pay, for instance), and partly due to the fact that the bill’s authors have chosen to place four year sunsets on each of these provisions. The temporary nature of these policies ostensibly targeted toward the working class, as well as others such as temporary enhancements to the Child Tax Credit and the standard deduction, stands in sharp contrast to the permanent nature of some of the bill’s less-discussed provisions such as its permanent cuts to the estate tax and so-called GILTI taxes on multinational corporations’ offshore profits.
As seen in Figure 5, the vast majority (85%) of the tax bill represents an extension of the temporary portions of the same tax cuts first enacted by Republicans on a temporary basis in 2017. Of the remainder, only a small sliver are the highest-profile items getting an outsized share of the attention in the current tax debate.
Figure 5
Fully unpacking a bill of this size is no easy endeavor, and there is no doubt that many new and important findings regarding its effects will continue to trickle out in the weeks and months ahead. In the meantime, however, the JCT’s work offers a powerful starting point. The JCT has done a tremendous service in producing a range of very high-quality information in a very short amount of time to help the public understand this complex and, as it turns out, highly regressive piece of tax legislation.
Americans Deserve Better Than What This Horrific GOP Budget Will Impose on the Sick, Hungry, and Poor
House Republicans are trying to hide much of the impact of the SNAP cuts by slashing federal funding and then passing the buck to states. When a state can’t come up with the money to backfill for the large federal cuts totaling billions nationally, it will have to choose how to cut the number of people getting help or whether to opt out of having a SNAP program entirely. With this scheme, the plan walks away from the 50-year, bipartisan commitment to ensure that poor children get the help they need, whether they live in Alabama, Missouri, or California.
Proponents want to shift blame for the cuts to states, but the blame game won’t matter to children, families, seniors, people with disabilities, veterans, small business owners, and others when they are hungry and can’t afford food. (Republican portrayals of who gets helped by SNAP and Medicaid are selective at best — about 1 in 4 veterans and 1 in 4 small business owners live in a household getting help from SNAP, Medicaid, or CHIP at some point in the year, Census data show.)
This plan is replete with proposals that will add red tape, making things more cumbersome, more bureaucratic, and less user-friendly — and ultimately designed to fail families in ways that will leave people sicker, poorer, and hungrier.
At the same time, at least 13.7 million people would lose health coverage and become uninsured under the House Republicans’ Medicaid and Affordable Care Act marketplace agenda that deeply cuts Medicaid, erects new barriers to coverage, and allows the enhanced premium tax credits (PTCs) that help low- and middle-income families and small business owners afford health coverage to expire, the Congressional Budget Office (CBO) estimates. Some Republicans argue they shouldn’t be blamed for the 4 million people projected to lose coverage due to the PTCs’ expiration. That’s frankly absurd: they wrote a bill that extends all of the expiring 2017 tax cuts — and even expands provisions that benefit the wealthiest people in the country — yet chose not to extend the enhanced PTCs for people who need help affording coverage. That’s their agenda and they need to own it.
Like their approach to SNAP, House Republicans seek to obscure the impact of their health care cuts through complicated proposals, like limiting the ways states can fund Medicaid and adding lots of red tape and paperwork that makes it harder for people to get and keep health coverage. But here, too, there’s no hiding the outcome: millions of people, including children, will lose coverage and access to care for life-threatening and chronic illnesses as well as preventive care.
The House Republican plan targets some of its harshest attacks on people who are immigrants and their families. It would take away Medicare and marketplace coverage from certain immigrants, including people granted refugee and asylee status after proving they face persecution in their home countries, victims of trafficking and domestic violence, and people with Temporary Protected Status. The plan also takes away the Child Tax Credit from U.S. citizen children if both parents don’t have a Social Security number (even if one parent is a citizen), and strips access to SNAP benefits from people granted asylum and refugee status and other vulnerable groups who are living and working lawfully in the U.S.
Proponents of these cuts often falsely claim that they are restricting access for people who lack documentation, when the reality is that people without a documented immigration status already do not qualify for these benefits, and the cuts will largely impact lawfully present immigrants and U.S. citizen children in immigrant families.
Despite House Republicans’ rhetoric about supporting the “working class,” the plan targets working people and their families, making it much harder for them to get help weathering life’s ups and downs.Despite House Republicans’ rhetoric about supporting the “working class,” the plan targets working people and their families, making it much harder for them to get help weathering life’s ups and downs. Workers may need help because their employer lays them off or cuts their hours, or because they get sick or have to miss work to care for a sick loved one, and the House Republican plan takes help away from people in exactly these situations.
And for all of the rhetoric coming out of DOGE about making government work more efficiently, that commitment doesn’t seem to apply to working families who need help. This plan is replete with proposals that will add red tape, making things more cumbersome, more bureaucratic, and less user-friendly — and ultimately designed to fail families in ways that will leave people sicker, poorer, and hungrier.
Moreover, the House Republican plan would deny as many as 20 million children in working families from receiving the full $2,500 Child Tax Credit because their parents — who work important but low-paid jobs — don’t earn enough. The 17 million children who currently don’t get the full $2,000 Child Tax Credit would get nothing from the credit’s $500-per-child increase, even as families earning up to $400,000 would get the full increase. Last year 169 House Republicans voted to help most of the families they are now leaving out.
In contrast to its disdain for people whose budgets are stretched thin every month, the plan showers more tax cuts on the wealthy, extending the highly skewed provisions of the 2017 law and adding permanent expansions for wealthy households. In 2027 it gives households earning more than $1 million a year an annual tax cut of roughly $90,000, while low-income households receive an average of just $90 from the tax cuts — the same households who will then bear the brunt of cuts to Medicaid and SNAP.
This agenda won’t create a future of shared prosperity and economic opportunity, which is what’s required to build a country that’s truly great.
The plan’s tax cuts would cost nearly $4 trillion through 2034 — and over $5 trillion if one sees through its timing gimmicks like turning off tax cuts for middle-class families after four years while making some of its most top-tilted tax cuts — like the cut in the estate tax and the deduction for pass-through income — permanent. Moreover, the House Republicans cut more than $500 billion in clean energy tax credits — which would worsen health outcomes for communities facing high rates of pollution, and the plan’s health cuts would make it harder for them to access health care.
It’s been clear for some time that House Republicans were headed down this harmful path, but to see the contours of this bill emerge is somehow still shocking: that they would hurt so many people who struggle to afford basic needs and whom they have promised to help. And they continue to pursue this agenda at a time when the President’s tariffs, chaotically crafted and applied, have caused increased uncertainty and raised the risk of a recession, higher unemployment, and surging prices.
Whatever Republican policymakers may think, these policies aren’t popular with the public because they aren’t consistent with core American values, which include helping people when they fall on tough times and expecting wealthy people to pay their fair share.
This agenda won’t create a future of shared prosperity and economic opportunity, which is what’s required to build a country that’s truly great. There’s a better path forward, but it requires tearing up this legislation and replacing it with a plan that lowers costs and invests in people and families, while raising the revenues from the wealthy to make those investments and reduce economic risks associated with high debt.
Most Popular