JCT upholds Democrats’ proposals to raise taxes on all Americans
Washington DC– A new pair of analyzes from the nonpartisan Joint Committee on Taxation (JCT) shows that the Democrats’ latest tax and spending provisions being discussed will raise taxes for millions of Americans earning less than $400,000 per year, and the average tax rate for each single income category would increase. The JCT before confirmed that the Build Back Better Act (HR 5376) passed by the House would result in significant tax increases for taxpayers at all income levels.
Reports suggest Democrats are ready to move forward with the full list of tax increases in legislation passed by the House, with no tax cuts for low- and middle-income households. JCT believes that legislation retaining these tax increases, while removing the social policy tax cuts that had been contained in subtitle G, would provide zero tax relief for the middle class, with the vast majority of Americans seeing tax increases at a time when they can least afford them.
“While the 2017 Republican tax reform cut taxes for all Americans and increased the progressivity of the tax code, the Democrats’ approach to tax reform doesn’t cut anyone’s taxes, but it would raise taxes for millions. of low- and middle-income Americans at a time when they can least afford it,” said U.S. Senate Finance Committee Ranking Member Mike Crapo (R-Idaho). “The economy is already reeling from bad Democrat policies and people are struggling to make ends meet. The last thing they need is higher taxes, especially in light of the growing risks of recession and stagflation.
The first analysis projects the distributional effect of tax increases passed by the House without temporary social policy tax relief. The analysis confirms:
- In 2023, as we face the twin threats of inflation and recession, Democrats raising $33 billion from Americans earning less than $400,000 a yearwhile offering a net tax reduction of about $1.5 billion for Americans earning more than $400,000 a year.
- Over the 10-year budget window, approximately 30 percent revenue collected to offset expenses and reduce the deficit would come from Americans earning less than $400,000 a year.
- Under the proposal, the average tax rate for each income category would increase.
The second analysis projects the tax effect on tax filers in each income category. The analysis shows:
- If the Democrats’ tax reform is signed into law this year, more than a quarter of Americans earning between $75,000 and $100,000 will see a tax hike next year, as will more than half of Americans earning between $100,000 and $200,000.
- In 2023, for taxpayers with income between $200,000 and $500,000 (85% of them are in the range of $200,000 to $400,000), more than 80% will see a tax hike, reinforcing that these proposals will violate President Biden’s pledge not to raise taxes on anyone earning less than $400,000.
- By 2029, almost 20% of Americans earning between $50,000 and $75,000 will benefit from a tax increasewhile none will benefit from tax relief.
The analyzes do not include the repeal of the national and local tax cap (SALT). Previous analyzes by the Tax Foundation, Committee for a Responsible Federal Budget and others showed that the net effect would essentially eliminate all taxes on the wealthy, leaving the middle class to bear even more of the tax burden on their bill.