Trump is calling the budget that the GOP-controlled Senate passed on Thursday the “biggest tax cut in U.S. history.”
Budget that just passed is a really big deal, especially in terms of what will be the biggest tax cut in U.S. history – MSM barely covered!
— Donald J. Trump (@realDonaldTrump) October 21, 2017
It’s a large tax cut for most Americans, but experts say it’s not the “biggest ever.”
And for one group of high-income earners, their taxes may actually rise. Single filers earning between $191,650 and $416,700 will see their marginal tax rate rise from 33% to 35%. Married-joint filers earning between $233,350 and $416,700 will experience the same marginal tax rate increase. (Your marginal tax rate is the amount of tax paid on your next dollar of income, as you move into a higher tax bracket. It is not your overall, or effective, tax rate, which is typically lower.)
That’s according to an analysis from the Tax Policy Center, and interpreted in this graphic made by HowMuch. The Tax Policy Center’s analysis is based on assumptions that the standard deduction will be raised to $12,000 for single filers and $24,000 for married couples. Though, those numbers are still open for negotiation, meaning that this proposed tax plan doesn’t necessarily guarantee income taxes would rise for people in that tax bracket.
The number of people in this bracket is likely very small — about 1.3% of American households, according to 2013 Internal Revenue Service data. Those taxpayers sit in the 80th to 95th income percentiles, according to the Tax Policy Center.
The current proposal for changing the tax code would reduce the existing seven individual income-tax rates to just three: 12%, 25% and 35%.
Alan Cole, an economist at the Tax Foundation, said in a past MarketWatch article that most people assume reducing the number of tax brackets is one way to simplify the U.S.’s extraordinarily complex tax code — which has been a rallying cry for politicians, particularly on the Republican side of the aisle. The tax code contains about 4 million words — longer than the Bible, as Sen. Ted Cruz famously noted.
But anytime the number of tax brackets is reduced, there will be winners and losers at all levels of the income scale. And those who fall into this camp would see less benefit — possibly considerably less — than any other upper-income bracket.
“When reducing the number of brackets, you don’t want to have too much of a tax cut, but you also want to try to approximate something like the original curve,” Cole said. “The result of that means sometimes if you’re not super generous all the way across, you’re going to end up with a tax increase for some. It’s a little causality of simplification.”
So who wins the biggest here? The richest of the rich. Single filers earning more than $418,400 and married-joint filers will see their marginal tax rate drop from 39.6% to just 35%. Most middle class families will also see a decrease in their tax bills. Considering the median family income for 2016 is $59,039, that average family will likely see a decrease in their tax bill from 15% to 12%.
There’s one more group that stands to massively lose from Trump’s proposed tax plan. Extremely low income earners will see an increase in their tax bill. Single filers earning between $0 and $9,325, as well as married-joint filers earning between $0 and $18,650, will move to a 12% tax bracket from 10%.
The current tax proposal would reduce federal revenue by $2.4 trillion over 10 years and $3.2 trillion over the second decade, according to the Tax Policy Center.