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- Republican lawmakers say their tax bill will increase taxes only on “rich people in Manhattan and San Francisco.”
- An analysis by the Tax Policy Center found that isn’t exactly true.
- Nearly 8.5 million people could see a tax increase in 2018, and 4.6 million with midrange incomes could see a tax hike by 2025.
After a wild seven-week push, Republicans passed their massive tax bill on Wednesday and set into motion a sea change in the US economy.
So what does it mean for your taxes?
Here’s the bottom line: Analyses have found that the tax bill will, on average, cut taxes for Americans at every income level. But some clear winners and losers will eventually emerge from the tax-code overhaul.
Republicans have acknowledged that taxes will increase for some people – but they say it will happen to only the wealthiest Americans.
“The only people whose taxes are going up are the really rich,” GOP Sen. Ted Cruz said on the Senate floor Wednesday. “Every taxpayer, their taxes are going down, except rich people in Manhattan and San Francisco – some of them, their taxes may go up.”
An analysis by the Tax Policy Center found this is not the case and that millions of middle-income earners could eventually see their taxes increase under the GOP tax bill.
Before diving into the numbers, it’s important to note that most analyses look at the number of tax units that will be affected.
A unit does not line up with one person, but a single tax filing – so a married couple filing jointly is one unit, as is someone with three dependents. The Joint Committee on Taxation estimates there will be about 177 million tax units in the US in 2019 and 183 million in 2025.
According to the TPC analysis of the final GOP tax bill:
- 4.8% of tax units will see a tax increase in 2018.
- Based on the JCT’s 2019 unit figure, that means just under 8.5 million units would see their taxes increase next year.
The number is higher for middle-income earners:
- 7.3% of people in the middle quintile – those making between $48,600 and $86,100 – will see their tax bill increase.
- While the JCT’s income groups don’t align perfectly with the TPC’s, a rough estimate shows that would mean 2.75 million to 3 million middle-income units would see an increase.
And it increases in later years – in 2025, for example:
- 8.9% of Americans, or 16.3 million tax units, would see an increase.
- 10.9% of units with midrange incomes, or about 4.6 million units, would see get an increase.
The number of people seeing tax increases would soar in 2026 and 2027, the TPC found, because the individual tax cuts in the bill are temporary, meaning rates would snap back to their current levels after 2025. That would result in 53.4% of all units seeing an increase in 2027, according to the analysis.
Republicans argue that a future Congress will extend the cuts, pointing to the extensions of the Bush tax cuts under President Barack Obama as evidence.