Tax Reform 2.0 Helps the Rich at the Expense of Working Families
On Tuesday, House Republicans released the framework for “Tax Reform 2.0,” a plan to lock in lower taxes for the wealthiest Americans. Building on the Tax Cuts and Jobs Act passed last December, the proposal would make permanent several tax cuts that are currently set to expire in 2025. The result will be lower taxes for the wealthy and a deeper divide between the ultra-rich and working families.
Tax Cuts 2.0 would make permanent the following changes introduced by the Tax Cuts and Jobs Act—now in effect:
- An increase in the amount of assets exempted from the estate tax to $22 million
- A 20% deduction on profits from certain kinds of businesses that are subject to individual income taxes
- Lower income tax rates at the top of the ladder—from 39.6% down to 37% for households making $600,000 a year
- Little change for tax rates at the lower end of the income distribution, with low-income households receiving near-zero benefits from the tax cuts
Tax Reform 2.0 Would Harm Working Families
Since Congress passed these tax cuts, nonpartisan research and evidence suggests that nearly all the benefits from Tax Reform 2.0 will go to the wealthy. This is contrary to the Republican claim that these tax cuts are meant to help the middle class.
Despite promises that cutting taxes on corporations and the wealthy would “trickle down” to working people and increase wages, American workers have seen their average pay decrease slightly in the last six months.
The real beneficiaries of December’s tax cuts are the wealthiest households. The same is true of Tax Reform 2.0.
The wealthiest fifth of households will enjoy 65% of the benefits of Tax Reform 2.0, according to analysis by the Institute on Taxation and Economic Policy. Coupled with the benefits they have from the existing tax cuts, a total of 71% of benefits from tax code changes will be felt by the richest households. More than half of those benefits will go to the richest five percent.
Meanwhile, low- and moderate-income families lose out. For the bottom 20% of households, the effects of Tax Reform 2.0 plus existing, permanent tax changes would result in a tax increase of one percent. For the next 20% of households, the impact would be a modest three percent tax cut—far less than the benefit given to the wealthy.
The Tax Reform 2.0 framework would exacerbate economic inequality between low- and high-earning households. What’s more, by increasing the federal deficit, the proposal could put essential social safety net programs such as Medicaid, Medicare and Social Security at risk. It risks widening the racial wealth gap and would hit households of color particularly hard—just as the December tax cut law has—because White households hold much more wealth and are far more likely to be in the top income quartiles than Black and Hispanic households.
For Real Reform to Happen, More Voices Need to Speak Out
Working families deserve real tax reform that helps them build financial security and wealth. Contact your Representative and tell them that Tax Reform 2.0 puts the wealthy ahead of working families. When we speak out against legislation that harms working families and advocate for policies that make financial security possible, we help turn the tax code right-side up.
Want to support the fight for equitable tax reform? Join our Right-Side Up Tax Reform Advocacy Campaign!