Nonpartisan Analysis: Paul Ryan’s Tax Cuts To Benefit 1%

The new tax plans proposed by House Republicans would primarily benefit only the richest members of society while potentially weakening the economy, a nonpartisan analysis from the Tax Policy Center found.

According to that study, 99.6 percent of the tax cuts would favor the top 1% of Americans by the year 2025, reports the Washington Post. After taxes, this group would see their incomes increased by an average of 10.6 percent and would save, on average $240,000 per household.

Lower and working-class households would see small gains from the new plan as well. On average, the bottom 20 percent would see their incomes increase by 0.5 percent, or $120 per year, while those in the middle class – those between the 60th percentile and 95th percentile – would pay, on average, an addition one percent in taxes per year.

The tax plan, as it now stands, would eliminate the estate tax, lower tax rates on marginal income and changes taxes for businesses so that they can write off capital investments but would no longer offer deductions for interest payments.

“We think this is a game changer, because we’re going all-in for growth and all-in for simplicity,” said Ways and Means Committee Chairman Republican Rep. Kevin Brady of Texas of the tax plan in June, according to the Wall Street Journal.

The corporate tax rate would also be reduced from 35 percent to 20 percent.

In their evaluation of the tax plan, the Tax Policy Center used several methods, including two mathematical models of the economy focusing on both short- and long-term effects, notes the Post. In the first few years, the plan would have positive effects, the analysis found, increasing the gross domestic product (GDP) by roughly one percent.

But the evaluation concluded that, over a longer period of time, the economy would weaken, since the tax cuts would require that the federal government borrow additional money to maintain its operations, thus adding to the national debt and making it more difficult for households and businesses to obtain loans. GDP would decrease by 0.2 percent by 2036. However, these forecasts are based off of some speculations that could hold true or change.

“Everything is uncertain,” said Tax Policy Center Director Leonard Burman. “The best thing we can do is put the information out there.”

Sources: Washington Post, Wall Street Journal / Photo Credit: Gage Skidmore/Flickr