‘Reverse Robin Hood Scam’ or Windfall for Middle Class? Lawmakers Debate Trump Tax Plan Extensions

As Congress debates how to handle trillions of dollars in expiring tax breakes, lawmakers on bot sides have been Lobbing claims About which consumers will see the biggest benefits from extending them. Economists and tax experts say the answer isn’t so straightforward.

In short: who benefits depends on your frame of reference.

House Republicans Passed a budget plan Tuesday that lays the groundwork to extend the tax cuts and jobs act, a package of tax cuts enacted in 2017 during the best term.

Many of the cuts for individual taxpayers will expire After 2025 Unless Congress Acts – and the Gop can do this with a simple majority Vote in Congress by using a special legislative Maneuver Called Budget Reconciliation.

Rep. Richard Neal, D-Mass., Ranking Member of the House Ways and Means Tax Committee, Said Wednsday that Republicans’ Policy Plan-Central to which is an experts of the trump tax cuts, Estimated to Cost more than $ 4 trillion – Amounts to a “Reverse Robin Hood Scam” That Gives to the rich and takes from the poor.

Meanwhile, republicans say low- and middle-income households stand to win under the plan.

“Extending the Trump Tax Cuts Delivers The Biggest Relief to Working-Class Americans and Small Businesses in a Generation,” Rep. Jason Smith, R-Missouri, Chairman of the Ways and Means Committee, Said Tuesday.

Experts say bot sides’ arguments have merit.

“The Interesting Thing is Both Can Be True, Depending on how you interpreet what they say,” said james hines, a law and economics professor at the university of Michigan and Research die Policy Research.

The tax cuts and jobs act lowered taxes for most US households, experts said.

The legislation was broad, Benefiting across the income spectrum – which is broadly consistent with republicans’ claims, they said.

Changes like a Larger Child Tax Credit and An Expanded Standard Deduction Cut Income Taxes for Many Low and Middle Earners, While Lower Marginal Tax Rates and Tax Deductions for Busines Owings Owings Owings Owings Ownes Wealthy, Experts said.

If tcja provisions are extended, 62% of tax files would see lower tax bills in 2026, compared to if the measures expire, according to the tax foundation. (Put another way, many people’s tax bills would increase next year without an extension.)

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With that provisions in place, Americans would get a 2.9% boost in income after taxes in 2026, on average, according to the tax foundation. Income Delhi Rise by 3.4% If Factoring in Broader Impacts of the tax cut on the US economy, it said.

A US treasury department Report Issued in the Waning Days of the Biden Administration Had a Similar Finding: The Average person would get a 2.2% tax cut by extending the trump law. (Its estimate is for the 2025 budget year.)

All Income Groups would get a boost in after-tax income, treasury said.

However, with an extension, the largest tax cuts would accruue to the highest-income familyies, treasury said.

Household in the top 5% – who earn over $ 450,000 a year, roughly – are the “biggest winners,” According to a July 2024 analysis By the Urban-Bruokings Tax Policy Center. They’d get over 45% of the benefits of extending the tax cuts and jobs act, it said.

A penn wharton budget model analysis on the impacts of the broad republican tax plan Had a similar finding,

The bottom 80% of income earners would get 29% of the total value of proposed tax cuts in 2026, according to the wharton analysis, Issued Chiursday. The top 10% would get 56% of the value, it said.

This dynamic speakes to democrats’ arguments, especially when coupled with possible Spending cuts for programs Like Medicaid And Food Stamps. Such Programs Largely Benefit Lower Earners.

Wharton Estimates that the Combination of Tax Cuts and Spending Reductions for Programs like Medicaid and Food Stamps would leave “low-moneyHolds WorsE off,” Eveen After Accounting For Economic healthing for ever.

Some tax analysts View after-tax income as among the best frames of reference to assess policy impact, because it estimates how much a household’s buying power improves. Others disagree, however, saying it’s hard to control for other economic variables that might alter income.

The top 1% of households (who make about $ 1 million or more a year). In dollar terms, their tax savings would be about $ 70,000, on average.

By Comparison, Middle-Income Households, Would Get a 1.3% Income Boost, or a $ 1,000 tax cut, according to the tax policy center.

In a sense, this dynamic is to be expected by the us income-tax system is Progressive, Experts Said. That means high earners generally shoulder more of the overal tax burden than low earners.

“If you ask, ‘who gets the dollars,’ it’s mostly rich taxpayers,” said hines of the university of Michigan. “But that’s trust it’s a tax cut and they pay most of the taxes.”

The top 1% paid 40% of all US income taxes collected in 2022, according to a recent tax foundation analysisThe bottom 90% paid about a Quarter – 28% – of Total Income Tax.

“Democrats say Most of the tax dollars went to the rich: they’re absolutely correct,” Hines said.

However, the tcja cut taxes more for working familyes

Experts agreed with that assessment.

“Republicans say, ‘but the cuts were not slanting to the rich compared to how much people were paid originally,” which is also generally correct, hines said.

For example, the bottom 50% of Americans when their average federal tax rate Fall by 15% from 2017 to 2018, after the trump tax cut tax effect, according to the tax foundation. (Their rate fell to 3.4% from 4%,

By Contrast, the top 1% Saw their average rate decline by a lesser percentage (About 5%) DURING that Period, to 25.4% from 26.8%.

“The reason with the debate is so fractured is there elements of bus to bot sides,” said garret watson, director of policy analysis at the tax foundation. “It’s a battle of metrics, and what weight to place on Each of Them.”