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Senate plan hurts poor, middle

IFP News: New estimates show big tax cuts for millionaires, tax hikes at middle and below for Iowans

IOWA CITY, Iowa (Nov. 20, 2017) — The bottom-earning 60 percent of Iowa taxpayers would see a $58.7 million tax increase in 2027 with what is being billed as a middle-class tax cut in Congress, while permanent tax breaks for millionaires would drive up deficits and drive millions of Americans off health insurance.

“A weekend of further scrutiny by responsible analysts shows just how much this legislation is skewed toward the wealthy and most powerful,” said Mike Owen, executive director of the nonpartisan Iowa Policy Project (IPP).

“When you look beyond the early years of this plan, you see that low- and middle-income Iowans are whacked by this plan in 2027. They’ll pay more in tax, on average, and many will have lost their health insurance while millionaires, billionaires and corporations bank the benefits.”
 
In addition, the nonpartisan Institute on Taxation and Economic Policy (ITEP) has released new estimates showing that for Iowa, well over half of the tax reductions would go to the top 20 percent in 2019 under the Senate Finance Committee plan, and that Iowans in the bottom 60 percent would see an overall net increase in taxes despite proponents’ claims of the plan benefiting the middle class.
 
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 For the middle 20 percent of Iowans in 2027, with an estimated average income of $72,400, there would be an average tax increase of $40. ITEP projects the majority of taxpayers in the bottom 60 percent would see small tax cuts, but the share seeing increases would, on balance, pay more than the reductions.
 
“The point is not the size of the increase at those levels, but the fact that those taxpayers cannot expect any, or any substantial, tax benefit,” said Anne Discher, interim director of the nonpartisan Child and Family Policy Center in Des Moines.

“Meanwhile, the very wealthy will benefit, services inevitably will be cut for all, and — if the individual mandate on health insurance is repealed — health insurance will be out of reach for millions,” she said.

The full ITEP report is here: https://itep.org/senatetaxplan/.

 
The bill would provide nearly half of total tax benefits in 2019 to the top 20 percent of households. The top 1 percent would receive tax cuts averaging over $32,000, or about 39 times the average tax cut in the middle 20 percent.
 
By 2027, the disparity would be even more stark: The top 1 percent would get a tax cut of $4,770 on average as several breaks expire — but the middle 20 percent would see the tax increase of $40.
 
One of the key pieces of the legislation is an expansion of the Child Tax Credit (CTC), which provides only minimal and temporary help to families that need it the most, but extends eligibility to those who do not need it at all. While the previous proposal raised the limit to qualify for the CTC to $1 million, the Finance version limits eligibility to $500,000 — still far above the current $150,000 limit for what is considered a work support to help parents.

IPP and CFPC are nonpartisan, nonprofit Iowa-based organizations that collaborate as the Iowa Fiscal Partnership on analysis of public policy choices affecting Iowans, particularly those in working families and at low incomes. Find reports at iowafiscal.org.