September 21, 2020, 6:47

Paul Ryan’s poster family for middle-class tax cuts would ultimately get a tax hike

Paul Ryan’s poster family for middle-class tax cuts would ultimately get a tax hike

Speaker Paul Ryan’s case for his tax bill makes a very specific claim — that a typical family of four will save $1,182 under this bill.

He made this claim during their press conference announcing the bill, and then hammered it home again and again and again in statements to the press and on social media:

“I don’t envy the partisans tasked with messaging against giving middle income families (family of four making $59K) $1,182 back,” AshLee Strong, Ryan’s press secretary wrote on Twitter, adding the hashtag #1182more.

The problem with selling the bill this way is that the claim is only partially true.

It is true that the average household in 2016, which the Census Bureau estimates makes made $59,039, would get a tax cut worth about $1,100 in the first year. (A more technical quibble with the claim is that many households aren’t families, and the average household size is 2.53, not 4.)

But after the first year, that claim looks much shakier. As NYU tax law professor and former Obama adviser David Kamin explains in a Medium post, the plan would actually result in a sizable tax increase for such a household over time:

The tax cut Ryan talks about initially comes from three main sources. First, the plan introduces a Family Flexibility Credit worth $300 for every adult in the household. That’s $600 off taxes for the $59,000 a year household, right off the bat. Second, the plan would place this family into a 12 percent tax bracket, down from 15 percent now. Third, the plan increases the child tax credit from $1,000 per kid to $1,600 per kid. These cuts are partially offset by the loss of the personal exemption, which under current law will allow families to deduct $4,150 per person from their taxable income in 2018, but this hypothetical family would still come out ahead overall.

But then, as Kamin explains, three funny things happen:

  • In 2022, the Family Flexibility Credit expires. This is presumably to make the tax bill cost less for Senate rules purposes, and Republicans will argue that the goal is to make it permanent at that point. Still, in the bill as written, it goes away entirely, raising taxes for this family.
  • While personal exemptions rise with inflation, the Child Tax Credit doesn’t, meaning its value erodes over time whereas the personal exemption’s value is set to grow.
  • Finally, the plan switches to adjusting tax bracket thresholds using chained CPI, a slower-growing inflation measure. That leads to tax increases for everyone over time, as more and more people get pushed into higher tax brackets.
  • Put together, these factors lead to a mild tax hike by year 2024, and a $500 hike by year 2027 for this $59,000 a year family of four.

    (Kamin also notes that the $1,182 savings figure is slightly off even in 2018. The real savings versus current law is $1,106; the $1,182 number comes by comparing the 2018 tax burden under the plan to the 2017 tax burden under current law, not what the family would pay in 2018 under current law.)

    This tax hike is a fixable problem. Republicans could make the Family Flexibility Credit permanent, or they could increase the Child Tax Credit, or they could make the Child Tax Credit indexed to inflation. But all of those fixes cost money.

    Running the math on these claims reveals exactly what the top priority is in the House Republican tax bill — corporate tax cuts, not tax cuts for middle-class families.

    So, as the bill is written, even the poster family Paul Ryan handpicked to support the bill would lose out by year 10. Keep that in mind when you hear him and his allies claim the bill is an unequivocal tax cut for the middle class.


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