Opinion: What you didn't know about tax reform and 'the rich'

The tax-reform bill cleared the House Tuesday afternoon and is expected to be taken up by the Senate soon (though it appears the House will have to re-vote on it after the Senate, for technical reasons). As it marches on toward becoming law, two refrains won't go away: first, that the bill is skewed in favor of "the rich"; and second, that it is unpopular.

The second is almost certainly a result of the first, which has been drilled into Americans' heads via nearly everything they're read or heard about it beyond GOP press releases. I argued Monday that it isn't the case, and today I'm taking another look at some numbers.

The premise that the bill favors "the rich" is based on the fact they will get larger cuts in terms of actual dollars. Well, yeah: They pay most of the taxes in terms of actual dollars. The question is how we should compare the benefit they get from this bill relative to what they pay -- and then compare that to what's happening for other income groups.

One comparison is how much of this bill's benefits they receive relative to how much of the tax they pay*. I've compiled two tables from data I got from the left-leaning Tax Policy Center (see below for links and explanations). The first table compares the proportion of all income tax paid by each group to the proportion of this tax bill's benefits they receive**. See it here:

As you can see, the bottom four income groups all receive a larger share of the tax bill's benefits than the share they pay in federal income taxes (see the fourth column, where a positive number is better). Even within the top quintile, the top 1 percent gets a smaller share of the tax bill's benefits relative to what they pay in income taxes.

So, yeah, maybe it doesn't look like a lot to say the bottom quintile gets only 1 percent of the tax cut. But in light of the fact that group pays minus-4 percent of all income taxes, it looks much better.

The second table makes the same comparison, but uses all federal taxes paid (not just income tax).

The distribution is more even when other federal taxes are taken into account. Still, the basic story is the same: The bottom income groups fare better than the top groups relative to what they pay now (except for an odd advantage in this case for those in the 96th through 99th percentiles; I'm not sure how to explain that).

Perhaps the bill wouldn't be quite so unpopular if more people understood how these distributions work. It might also help if more people understood they'll be getting a tax cut: A new poll for Politico/Morning Consult found only one-fifth expect a tax cut. But the opposite is true: The Tax Policy Center found four-fifths of taxpayers will pay less. Just how unrealistic are Americans about this bill? Although the Tax Policy Center found less than 5 percent will pay more in taxes due to this bill, the Politico poll found one-third of Americans expect their taxes to go up.

Blame the media for the way they have reported about this bill, Democrats for their demagoguery about the bill, or poll respondents for not being skeptical enough about the narrative Republicans are trying to raise taxes on much of the country. In any case, so much of what's said and believed about it simply isn't true.


*The most recent data for share of taxes paid , reported earlier this year, is for 2013. It may be slightly different by 2018, but the trend for recent decades makes clear that any difference shouldn't be too great.

UPDATE: Naturally, no sooner had I published this than I came across a link to the Tax Policy Center's estimates for shares of taxes paid in 2019. Rather than re-doing the tables above, I'm simply providing the link here so you can look at the projections yourself. The differences are very small -- a couple of percentage points here and there -- and do not change the bottom line that lower income groups are getting a larger cut relative to the taxes they pay today. But there is updated data, if you care to look and compare.

**The easiest thing to do would have been to compare the proportion of the benefits shown for 2018 in this analysis . Unfortunately, the percentages add up to more than 100 percent. So I used the proportions implied by this table , which shows the average dollar amount per income group and comes to 100 percent. The differences for each group are pretty small: less than 1 percentage point in each case.

About the Author

Kyle Wingfield
Kyle Wingfield
Kyle Wingfield joined the AJC in 2009. He is a native of Dalton and a graduate of the University of Georgia.