November 16, 2021

JCT Confirms Majority of Democrats’ Tax Relief Goes to Wealthy

Middle class sees fleeting benefits, while others face tax increase “No tax on those with incomes below $400,000” pledge busted

Washington, D.C.--A new analysis by the nonpartisan Joint Committee on Taxation (JCT) of the latest version of the Democrats’ reckless tax-and-spend bill (H.R. 5376) confirms that it gives tax cuts to the wealthy; provides fleeting and limited tax relief to low- and middle-income earners; and, violates the President’s promise to not raise taxes on anyone with income below $400,000.

“This analysis proves that any suggestion this bill constitutes a broad-based middle class tax cut is clearly false,” said U.S. Senator Mike Crapo (R-Idaho), Ranking Member of the Senate Finance Committee.  “The analysis also documents that the Administration’s pledge that ‘no one with income below $400,000 will see their taxes go up’ is not true.  Budget gimmicks used in the bill create a structure that substantially frontloads deficit-financed tax relief into the first year, pouring gas onto a currently accelerating inflationary fire.  Further, aspirations for tax relief to be extended in future years, without specifying which additional new tax increases would pay for it, promise to dramatically worsen our debt crisis and lead to longer-term inflation pressures.” 

Because the bill relies on a number of gimmicky sunsets and expirations in an attempt to hide the true costs of Democrats’ desired permanence of policies, there is no single year where every tax provision will be in full effect at the same time.  However, even in the first year, when the greatest amount of relief is in effect, less than a third of low- or middle-income taxpayers would receive meaningful tax relief, while nearly 90 percent of those earning between $500,000 and $1 million per year would get a substantial tax cut.

From the analysis:

In 2022:

  • Less than one third of those earning between $20,000 and $100,000 will receive a significant tax cut of more than $500.
  • More than two thirds of those earning $1 million or more, and nearly 90 percent of those earning between $500,000 and $1 million, will receive a significant tax cut.

In 2023, almost all lower- and middle-class tax relief is gone.

  • For example, merely 3.5 percent of those earning between $50,000 and $75,000 will receive any kind of tax cut (vs. more than 30 percent for 2022), while more than 12 percent will receive a tax increase (vs. less than 0.15 percent for 2022). 
  • More than 45 percent of those earning $1 million or more continue to receive a significant tax cut, as do two thirds of those earning between $500,000 and $1 million, with less than a third in that category getting a tax increase.

In 2031:

  • Even by the last year of the bill--when the State and Local Tax (SALT) relief for the wealthy is technically gone--the rate of millionaires and those earning more than $500,000 receiving significant tax cuts will be three times the rate of taxpayers in any other income category between $30,000 and $200,000.

Not only do the phase-in and phase-outs mask the true distributional effects, but the footnotes in the analysis suggest an even greater hit to lower income families and even greater benefits for the rich.

  • The analysis does not factor in the effects of the reinstatement of the Superfund tax or the $8.7 billion tax increase on nicotine.  JCT has separately affirmed that both tax increases will increase the tax liability of taxpayers earning below $400,000, and JCT has affirmed that the distribution of the tobacco tax is very regressive. 
  • The distributional effects of the credit for the purchase of an electric vehicle, and the credit for the purchase of an electronic bicycle, are not included in this analysis.  These provisions are also expected to benefit those more in the higher income categories.