Rigging the Economy to Further Benefit the 1% -- the Pennsylvania Numbers

Last Friday, we got the first national estimates of who benefits from the Trump Tax plan -- the "Unified Code for Rigging Our Tax Code Further to Benefit the 1%." While that's not the official title, it's more accurate than the Trump Administration name -- "the Unified Framework for Fixing Our Broken Tax Code." Last week's analysis by the Tax Policy Center showed that, by 2027 (Table 3 in the Center's report), 80% of the benefits would go to the top 1%, an increase from 53% in 2018 (Table 2).
Now, courtesy of our friends at the Institute on Taxation and Economic Policy (ITEP), we have PA-specific analysis. To no one's surprise, the thrust of the findings are the same as in the earlier Tax Policy Center national analysis. In 2018:
  • 61.5% of the tax reduction in Pennsylvania would go to the top 1%
  • 71.6% to of the tax benefits go to the top 5%
  • Only about one eight of the benefits (12.4%) would go to the bottom 60% -- $70 per taxpayer as opposed to $68,000 per taxpayer for the top 1%.
  • That's $1.35 per week to the bottom 60%, on average, and $1,308 per week to the top 1%.
Here are some of the provisions that drive these skewed benefits. On the individual tax side, the Trump plan would lower the top tax rate from 39.6% to 35%. The plan also repeals the estate tax. And there are massive tax cuts for business which most benefit high-income taxpayers. In fact, over the first 10 years according to the Tax Policy Center, the tax cuts for business add up to a $2.65 trillion dollar cut while the individual provisions amount to a $471 billion increase.
As the net increase in taxpayers for individuals indicates, for many outside the top 1%, this proposal would INCREASE taxes. One big reason why is the elimination of the deductibility of state and local taxes -- which matters a lot to upper-middle income taxpayers. As a result of this provision, 20.8% of Pennsylvania taxpayers in the second-highest income quintile would see a tax increase under the Trump proposal, 36.2% of the next 15%, and 41.1% of the 95th to 99th percentile. So roughly three out of 10 Pennsylvania taxpayers from the 60th to the 99th percentile (earning up to $532,000) would pay $1,000 to $4,000 more each so that the top 1% receives that average cut of $68,000. The 60th to 99th percentiles include a lot of Trump votes. They also include many people who would be willing to contribute more for education and improving the social safety net but not to give millionaires and billiionaires a tax cut. For both these reasons, therefore, the Trump tax plan seems likely to fail politically in its current form.


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