By Andy Puzder for RealClearPolitics
In a speech final week introducing his proposed $6 trillion 2022 price range, President Biden claimed that the advantages of the Republican Occasion’s Tax Cuts and Jobs Act “went to the wealthiest 1% of America.” It’s not the primary time he’s made this declare.
In his first speech to a joint session of Congress, Biden described the TCJA as a “large windfall” for “these on the very high.” To proper that mistaken, he proposes eliminating loopholes and elevating the highest tax fee from its present 37% to 39.6%.
Why? In order that “the wealthiest 1% of People” will “pay their justifiable share,” a phrase that the president and his fellow Democrats repeat with abandon.
However there’s a giant downside with Biden’s claims: They’re merely unfaithful. It’s time Republicans began extra aggressively pointing that out.
Let’s begin with that supposedly “large windfall” that went to the “wealthiest 1%” of America. Whereas the TCJA decreased efficient earnings tax charges for all earnings teams in 2018, the highest 1% skilled no windfall.
Moderately, in line with the latest IRS earnings tax knowledge, the highest 1% of taxpayers paid $616 billion in 2018, roughly the identical quantity they paid in 2017. However the backside 99% paid $65 billion much less. Some “windfall.” If the TCJA was a tax reduce for the wealthy, it was the weirdest one within the historical past of tax cuts for the wealthy.
However did these evil 1-percenters pay their justifiable share? Seems they did – and positively a bigger share than when tax charges have been final at Biden’s proposed 39.6%.
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In 2018, whereas the highest 1%’s share of adjusted gross earnings declined barely to twenty.9% (from 21.0% in 2017), its share of the earnings tax burden elevated to 40.1% from 38.5%. “Truthful” is within the eye of the beholder, however think about: The highest 1%’s share of taxes paid almost doubles its share of earnings.
For extra “justifiable share” perspective, think about that in 2018, the highest 1% paid extra in earnings taxes than the underside 90% of taxpayers – mixed.
Biden additionally could be stunned to be taught that the highest 1% truly paid a better share of earnings taxes in 2018 underneath the TCJA than in any yr since at the very least 2001 – when it paid 33.2%.
That features every of the 5 years from 2013 to 2017 following the Obama tax hikes, when the highest fee final stood at 39.6% – the speed Biden is at present proposing.
You learn that proper. The very best earners paid a larger share of earnings taxes after the Republicans’ 2017 tax cuts than they paid after the Democrats’ 2013 tax improve. However how can that be if the highest tax fee in 2018 was solely 37%?
Nicely, the TCJA elevated taxable earnings for wealthier People by lowering the itemized deductions they may declare. Excessive earners typically profit extra from itemizing deductions. Decrease earners typically profit extra from the usual deduction. The TCJA elevated the usual deduction and restricted itemized deductions.
In line with IRS knowledge, following the TCJA, the quantity taxpayers claimed for itemized deductions dropped by 55%, from about $1.46 trillion in 2017 to about $650 billion in 2018. That’s over $800 billion that was taxed in 2018 however not in 2017.
The TCJA’s capping the deduction for state and native taxes (SALT) at $10,000 was chargeable for $480 billion of that lower – a whopping 59%. However Biden helps restoring the SALT deduction though that deduction advantages principally the upper-income taxpayers he so desperately needs to tax.
Why would he wish to try this? Nicely, the SALT deduction primarily advantages excessive earners in high-tax blue states. So Biden is just not alone is searching for to revive it.
Repealing the cap President Trump placed on the SALT deduction is a high tax precedence for Senate Majority Chief Charles Schumer (D-N.Y.) and Home Speaker Nancy Pelosi (D-Calif.), who need both to improve or eradicate the $10,000 cap as a part of Biden’s infrastructure invoice.
Like Biden, these legislators additionally declare to favor closing tax loopholes for the rich – simply not for his or her rich supporters. “Do you wish to give the wealthiest individuals in America one other tax reduce?” Biden requested in his price range introduction speech. Apparently for the Democratic management, the reply is: Sure, we do.
So, the TCJA was not a windfall for the wealthy, and it didn’t end result within the wealthy paying lower than their justifiable share of earnings taxes. It closed loopholes – the most important of which Democrat management wish to restore – that primarily profit rich taxpayers.
Elevating the highest tax fee to 39.6% underneath Obama resulted within the wealthy paying a smaller share of earnings taxes than they paid in 2018 underneath the TCJA. There may be actually no assure that they might pay a bigger share if Biden repeated Obama’s tax-increase error – notably if the Democrats begin restoring tax loopholes for his or her rich backers.
Republicans have the higher a part of this argument. They should begin making it.
Syndicated with permission from RealClearWire.
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