Whose Tax Cuts?

A Republican tax reform bill is expected to be released this Thursday, laying out the details of what President Trump has called a "middle class miracle" that will benefit working Americans and leave high earners no better off: the plan "is not good for me, believe me," Trump has said.

The left-leaning, nonpartisan Tax Policy Center disagrees. In an analysis released in late September, the think tank estimated that the highest-earning 1% of the population – those making over $730,000 per year – would receive most of the tax cut: 53.3%. The top tenth of that sliver – the 0.1% of taxpayers who earn over $3.4 million per year – get 30.3% of the cut.

Any across-the-board cut in tax rates will boost the after-tax incomes of higher earners more than those of lower earners: x% of $1 million is much greater than x% of $50,000. White House press secretary Sarah Huckabee Sanders defended the cuts with an anecdote about reporters going out for drinks. These ten members of the fourth estate split their $100 tab so that the first four paid nothing, the fifth paid a dollar, and so on up to the richest, who paid $59. 

Note: the bill's release has been postponed from Wednesday to Thursday.

One day the bartender gave them a $20 discount, and they recalculated their respective contributions using the same system. Now the first five paid nothing, the sixth paid $2 instead of three, and so on up to the richest, who paid $49. The highest percentage gains went to the fifth reporter, who got a 100% break. But the highest gains in absolute terms went to the richest: $10 off, or 50% of the total cut. The poorest four, who drink for free, got nothing off. The richest reporter was heckled until he bailed on drinks entirely, at which point the remaining nine found they couldn't even cover half the tab.

Sanders closed with this lesson about high earners: "attack them, and they might start drinking overseas, where the atmosphere is somewhat friendlier." That may be true, but Sanders is defending an outcome that Trump and Treasury Secretary Mnuchin have repeatedly said will not happen (though Mnuchin has since allowed that it's "very hard not to give tax cuts to the wealthy.") We'll learn more Thursday. (See also, Trump's Tax Reform Plan.)

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