News Analysis: A ‘Massive’ Middle-Class Tax Cut May Not Be in Store

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If those benefits do not accrue, many workers could face higher taxes while companies keep their savings or pass them on to shareholders in the form of higher dividends.

Democrats assailed the bill as a corporate handout at the expense of workers. Representative Suzan DelBene, Democrat of Washington, said the bill included “tax cuts for the wealthiest paid for on the backs of our children and grandchildren.” Republicans, she said, “have cooked up a plan behind closed doors that could actually increase taxes on working families.”

The Republican architects of the bill headlined their sales pitch by saying the plan would deliver a tax break of $1,182 a year to a typical family of four earning $59,000 a year.

“This plan is for the middle-class families in this country who deserve a break,” Paul D. Ryan, the speaker of the House and Republican of Wisconsin, said on Thursday. “It is for the families who are out there living paycheck to paycheck, who just keep getting squeezed.”

For those families, the potential benefits are complicated. Calculations by David Kamin, a former Obama administration official who now works on tax issues at New York University’s law school, suggest that the family cited by Mr. Ryan would see its tax cut evaporate over a decade, because of the expiring tax credit (assuming it is not extended) and a change in inflation indexing. By 2024, Mr. Kamin estimates, the family’s tax bill would be higher than it would have been under the current law.

If the bill simply cut income or payroll tax rates for middle-class workers and doubled the standard deduction for individuals and married couples, it would be easy for Republicans to make their middle-class case: They could just calculate the value of those changes, as the Bush administration did when it pushed its own tax cuts in 2001 and 2003. Those cuts reduced rates for the rich and for low- and middle-income earners alike.

But the new bill goes beyond rate cuts and the standard deduction to eliminate many tax preferences, some of which benefit the poor and the middle class and also presumes spillover effects from returning money to corporations.

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Under the current law, parents may claim personal exemptions on their tax forms for themselves, their spouses and their children. The new bill would replace those exemptions with an expanded child tax credit and a $300 personal credit for each parent. For some families, the value of the new package appears to be less than the value of the old package, so their taxes would go up. Also, the $300 credit is set to expire after five years.

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Other workers will see tax increases by losing access to deductions they currently make heavy use of. Most notably, that includes workers with high out-of-pocket medical costs, who would no longer be able to deduct them under the Republican bill.

“If you’re a middle-class family, how do you judge this?” said Nancy Pelosi, the House minority leader and Democrat of California. “If you own a home or want to one day, you lose. If you have a sick child or a family member with long-term medical care needs, they take away the medical deduction, you lose. If you have student loans or want to have student loans or use the credit for lifetime learning, there’s a credit for lifetime learning, you lose.”

The Tax Foundation, an independent think tank that tends to find high growth effects from tax cuts in its models, found more hopeful results. It chose eight “example” tax filers last month to examine when the bill was released, and when it analyzed them on Thursday, the incomes of all eight rose from the plan.

In recent weeks, White House officials have focused less on the amount of tax cuts that would flow to workers under any Republican bill and more on the wage increases that could be prompted by corporate rate cuts. The White House Council of Economic Advisers has produced two studies suggesting the cut to a 20 percent rate, as the bill calls for, could deliver a $4,000 income boost — or more — to an average household over time, a number that liberal economists call inflated.

“I would expect to see an immediate jump in wage growth,” the council’s chairman, Kevin Hassett, said last month.

Polling suggests a middle-class message is critical for both the Republicans trying to pass a bill and the Democrats attempting to kill it. A new survey of battleground states by Global Strategy Group and Hart Research Associates, conducted on behalf of the liberal groups Not One Penny and Americans for Tax Fairness, found even a strongly pro-Trump group of voters voicing concerns over the plan’s effects on workers.

Six of 10 respondents in the survey said they believed the plan would benefit the wealthy more than the middle class. Only two in 10 said they believed they would benefit personally. The respondents voted for Mr. Trump by a 13-point margin last year. The poll also tested attack messages on the plan and found that those that stressed its benefits to the rich and corporations were effective at eroding support for it.

“It puts us in a very strong position to win this battle,” said Bryan Bennett, polling adviser for Not One Penny, a group formed to fight tax cuts for the wealthy.

Public Opinion Strategies also conducted a poll about the tax plan recently, on behalf of the American Action Network, a conservative group that supports Republicans’ tax efforts. It tested which messages could move voters on the bill. One of the most effective started with this: “The plan will benefit those who need it most, the middle class.”

Thomas Kaplan contributed reporting.


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