Fiscally irresponsible Senate tax plan prioritizes corporate tax cut, many everyday Americans made worse off

The latest tax bill moving through Congress shares the same harmful architecture as previous versions, and it adds on the loss of health care for millions of Americans. Further, this bill takes a cynical approach towards safeguards meant to promote responsible budgeting, and instead contains fiscal time bombs.

The Senate tax and health care bill has the same negative outcomes as the House tax bill and the Republicans’ unified tax framework: It provides the largest share of the tax cuts to wealthy individuals and profitable corporations, while many working-class and middle-income households are left out or even harmed. A substantial number of families would see tax increases as a result of provisions in the bill, including some that hit Minnesota particularly hard. And it would add more than $1 trillion to the deficit, with clear plans to come back and deeply cut health care and other critical services, leaving the nation’s children, elderly, people with disabilities, workers, and families worse off. The full Senate is expected to vote on this bill as early as this week.

What’s new: millions lose health insurance

On top of their upside-down tax priorities, the Senate piles on the repeal of the individual health insurance mandate, which generates savings for the federal government that is used to pay for dramatic permanent cuts in corporate taxes. Repealing the mandate is expected to result in 13 million fewer Americans having health insurance, and the federal government spending less on Medicaid and the tax credits and other measures that millions of Americans use to better afford the cost of health care. It is also projected to cause a 10 percent increase in premiums for those buying insurance on the individual market.

Who benefits: profitable corporations and the highest-income households

Whether looking at the tax portions alone, or the combined effect of the tax and health care components, the largest benefits go to those already doing well in today’s economy. For those working paycheck to paycheck, the tax benefits pale in comparison, and many everyday Americans would be worse off overall because of the bill’s erosion of affordable health insurance.

Profitable businesses and those with the highest incomes are the main beneficiaries of central elements of the bill, including cutting the corporate tax rate from 35 percent to 20 percent, providing tax cuts for “pass through” business income, steeply cutting the estate tax, and repealing the Alternative Minimum Tax.

For working-class and middle-income people, the benefits are much smaller. For example, under the Child Tax Credit expansion, about 10 million children in working families live in households that will get just $75 per family or less, while a family with two children and income of $500,000 would get a $4,000 tax cut. Others will find that any benefits from a higher standard exemption or income tax rate cuts are partially or completely swept away by the loss of other exemptions and deductions.

Minnesotans are especially harmed by the Senate’s proposed elimination of the State and Local Tax Deduction; in fact, the Tax Policy Center finds that Minnesota’s 3rd Congressional District is among the 20 Congressional districts with the highest share of tax-filers claiming this deduction.

Adding up all the tax changes, the Tax Policy Center finds the largest average tax cuts in 2019 go to the 5 percent of households with the highest incomes, and that’s true whether measuring the tax cuts in dollars or the percentage increase in after-tax income. The top 5 percent would get about 42 percent of all the net tax cuts that year.

Looking at the full impact of the bill, many everyday Americans would be worse off than they are today.

  • Households with incomes under $40,000 are worse off in 2025 on average, taking in account both the tax portions and the reduction in federal health care spending.
  • By 2027, the three-fifths of American households with incomes about $90,000 or less would be worse off, on average, according to analysis from the Institute on Taxation and Economic Policy that takes into account the tax changes and the health insurance changes that flow through the tax code, especially the lost of tax credits that bring down the cost of health insurance premiums.

The Tax Policy Center finds that about 9 percent of taxpayers in the U.S. would pay higher taxes in 2019. But since most of the individual income tax provisions expire, by 2027 50 percent of taxpayers would pay more in that year than they do today.

Trouble ahead: fiscally irresponsible steps taken to work around the rules

The U.S. Senate has rules meant to prevent policymakers from irresponsibly passing legislation that creates future budget problems. However, the bill’s writers have made a set of cynical choices to technically meet the requirements but plant a ticking fiscal time bomb.

The fast-track process that would allow this sweeping tax legislation to pass the Senate without bipartisan support also requires that it not add to the nation’s deficit after 2027. The bill’s authors seek to avoid adding to the deficit after a decade by having the provisions that provide individual income tax cuts expire, while making the corporate tax rate cut permanent. As a result, 50 percent of taxpayers would pay more in 2027.

Some of the bill’s proponents argue that they have no intent of letting that happen, that they expect future Congresses would extend the tax cuts for families rather than have them expire. This essentially puts in motion another round of expensive tax cuts just at the time that the nation would need the revenues for other priorities, not least of which is meeting the health care and other needs of a much larger number of elderly residents as the Baby Boomers age.

One bill after another has been released following the unified framework, and they all reveal the same fatal flaws. It’s time for policymakers to start over, and instead seek bipartisan solutions that focus on responsibly creating greater economic opportunity for those working hard to reach the middle class.

-Nan Madden

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High-income households get largest share of tax cuts, and their share gets bigger over time

The tax bill moving quickly through the U.S. House fails to do what its proponents claim: it is not focused on the middle class. The tax plan provides the largest tax cuts to those already doing well in today’s economy, and their share of the tax cuts grows significantly over time. The bill provides smaller and shrinking tax benefits for lower- and middle-income families, and a significant number of households would see tax increases.

Those are the findings as national experts, including the Tax Policy Center, the Center on Budget and Policy Priorities, and the Institute on Taxation and Economic Policy, have had a chance to dig into the details and see the implications of the bill.

ITEP finds that the 1 percent highest-income American households would get about one-third of the tax cuts in 2018, and nearly half of the tax cuts by 2027. That’s well out of proportion with either their share of total income (22 percent) or the share of total federal taxes this income group pays (26 percent).

For Minnesotans, ITEP finds a similar pattern. The 1 percent of households with incomes above $624,000 would receive 25 percent of the tax cuts going to Minnesotans in 2018, and 39 percent of the tax cuts in 2027. In contrast, the 60 percent of Minnesota households making around $75,000 or less would get just 21 percent of the tax cuts in 2018 and only 17 percent in 2027.

The Richest 1% of US Taxpayers Receive the Largest Share of Tax Cuts in the House Proposal

It’s not surprising that the largest share of tax cuts goes to those with the highest incomes, given that’s who benefits most from many of the centerpiece provisions of the House bill: corporate tax rate reductions, cut and repeal of the estate tax, repeal of the Alternative Minimum Tax, and providing special tax treatment for some “pass-through” income.

The share of the tax cuts going to the highest-income households grows in part because a number of provisions focused on middle-class families expire or get smaller as the years pass. A $300 per adult tax credit is temporary and disappears after 2023. The value of the Child Tax Credit, the increased standard deduction, and other elements of the tax code are eroded over time because the bill would adjust these provisions with a slower-growing measure of inflation than is used today.

It’s also the case that for some families, any benefits from provisions like the increased standard deduction and expanded Child Tax Credit are partially or completely outweighed by the loss of personal exemptions, increasing the tax rate in the lowest tax bracket, or other tax changes in the bill. An estimated 135,000 Minnesota children in working-class families are fully left out of the Child Tax Credit expansion — often cited as one of the bill’s primary benefits for families. Add in the 180,000 children who get only a partial benefit, and that’s more than 1 in 4 Minnesota children in working families fully or partially left out.

Some households in every income group would actually face a tax increase; the Tax Policy Center estimates that 7 percent of households would see tax increases in 2018 and 25 percent would see higher taxes in 2027.

Minnesotans are particularly harmed by the proposal to severely limit the State and Local Tax Deduction, which is claimed by more than one-third of Minnesota tax filers. This proposal penalizes states like Minnesota that have relatively higher incomes, that have responded to their residents’ desires for investments in public services, and that fund those services in ways that are more based on income, rather than property or sales taxes.

This bill is based on a theory of trickle-down economics that has failed time and time again to deliver, as the experiences of Kansas and the Bush tax cuts of the 2000s illustrate.

Federal policymakers shouldn’t make the same mistake. Not only will the promised jobs and wage increases fail to materialize, but we’ll all pay the price in terms of the cuts in health care and other essential services that policymakers plan to enact to pay for these tax cuts.

-Nan Madden

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US House tax plan still fatally flawed

The tax plan released in the U.S. House yesterday retains the same basic architecture as the unified tax framework previously released, and as a result, continues to have the same fatal flaws. It provides large tax cuts for the highest-income Americans and profitable businesses, while everyday folks get a smaller portion of the bill’s tax benefits – and some may face tax increases.

This tax plan irresponsibly adds at least $1.5 trillion to the deficit over 10 years, and it is lower- and middle-income Americans who will most feel the brunt of the impact when the bills come due to pay for these tax cuts. Importantly, we don’t have to guess where the cuts to essential services would come from. The menu of cuts is laid out in the budget plans passed by Congress and put forward by President Donald Trump this year; affordable health care through Medicaid and Medicare, basic food assistance through SNAP, and a range of other services that invest in our communities have all been targeted for deep cuts.

Of course, the details are important and we’ll be taking a deeper dive in the coming days. But at first look, we see that the centerpieces of the House plan are provisions that provide large tax cuts to corporations and those with the highest incomes:

  • Cutting the top corporate tax rate from 35 percent to 20 percent.
  • Tax cuts for “pass-through income.” The plan cuts taxes on some Americans who pay income taxes on pass-through income (from businesses such as partnerships, S corporations, and sole proprietorships). While touted as a benefit for small businesses, in fact the majority of this kind of income goes to high-income households.
  • Doubling the exemption then repealing the estate tax. Compared to the tax framework, the House bill delays the repeal of the estate tax to occur in 2024; this maneuver only hides the true cost of this provision, which only benefits the 0.2 percent largest estates nationally.
  • Repealing the Alternative Minimum Tax, which was created to ensure that higher-income people with a large number of deductions and other tax preferences still pay a minimum level of tax.

Retaining the current top income tax rate of 39.6 percent, rather than dropping it to 35 percent as proposed in the earlier tax framework, won’t significantly change the fact that this bill includes large tax cuts to the highest-income households.

Low- and middle-income households face a complex array of income tax changes in the House tax plan. More detailed analysis will be needed to understand the overall impact of the plan and how it differs from the unified framework (under which the 40 percent of American households with the lowest incomes were estimated to receive only about 5 percent of the tax cuts.)

But it’s already clear there are several ways this bill leaves behind families struggling to get by and get ahead. For example:

  • The proposed expansion of the Child Tax Credit leaves out more than 10 million children in low-income working families.
  • About 3 million children in working families would lose eligibility for the Child Tax Credit; about 80 percent of these are children born in this country and the remainder are “Dreamers” who came to this country as children.

One provision – the elimination of the deduction for state income taxes – particularly harms people in states like Minnesota that have relatively higher incomes and fund their public services through tax systems that are more equitable in how they treat residents across the income scale.

When both the tax implications and the likely cuts to services are taken into account, this is a plan that would exacerbate income inequality and do little to meaningfully improve the living standards of most Americans.

These aren’t the priorities that most Americans expect. Policymakers should sharpen their pencils and go back to work to craft a tax plan that doesn’t pave the way for deep cuts in health care and other crucial services, and that doesn’t provide big tax cuts for corporations and the wealthy at the expense of families living paycheck to paycheck.

-Nan Madden

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Action alert: Sign-on letter calls on Minnesota’s congressional delegation to reject large, damaging tax cuts

Congress is moving fast on a tax and budget framework that would dramatically cut federal funding for vital supports like Medicaid and SNAP food assistance, and other priorities like education, affordable housing, and environmental protection. These deep cuts to federal investments that build thriving communities and allow Minnesotans to make ends meet are paired with a tax-cutting framework that provides most of the benefits to profitable businesses and the highest-income Americans. A tax bill that fills in more of the details is expected to be introduced in the U.S. House on November 1, with a goal of passing it through the House by Thanksgiving.

It’s imperative that nonprofits speak up now. These are the wrong priorities for the country and Minnesota.

The Minnesota Council of Nonprofits is asking organizations to sign a letter to Minnesota’s Congressional delegation demonstrating our commitment to a tax code that raises the revenues required to support essential services and make long-term investments in our communities, that shares the responsibility for funding public services equitably, and values the important partnership between nonprofits and government.

Read the letter here and sign your organization on online.

Deadline for signatures is end of business, Friday, November 3.

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Senate Budget Resolution: different package, same bad news

The U.S. Senate’s budget plan calls for deep cuts in supports that low- and middle-income Minnesotans count on and would likely shift to the states more of the responsibility in making sure that families have enough food on their table or can access the health care they need. While the details around the edges might differ, the Senate plan looks a lot like the U.S. House budget resolution and President Donald Trump’s budget.

The Senate passed its budget proposal on Thursday. Among its main components are:

  • $4.1 trillion in cuts over 10 years to entitlements. Much of these cuts would be in health programs. The proposal calls for a $1.3 trillion cut primarily to Medicaid and subsidies through the Affordable Care Act to make health insurance affordable, as well as a $473 billion cut to Medicare. The proposal also proposes deep cuts to other entitlements. Cuts are likely to come from supports for some of the lowest income folks, like SNAP food assistance, the refundable portion of the Earned Income Tax Credit, and Temporary Assistance for Needy Families. Without access to affordable health insurance, food, and other basic necessities, many Minnesota families will certainly face additional barriers in trying to make ends meet.
  • $800 billion in cuts over 10 years to annual non-defense appropriations, the area of the budget which funds K-12 education, infrastructure, low-income housing, environmental protection, and many other programs that build strong communities. This area of the budget is already subject to strict funding caps and the Senate’s proposal would cut even more deeply.
  • Large tax cuts that will overwhelmingly benefit the highest income U.S. households. The Senate plan paves the way for at least $1.5 trillion in tax cuts over 10 years. Estimates of the tax framework recently released by the White House and Republican leaders in Congress show that 80 percent of the tax cuts would go to the 1 percent of Americans with the highest incomes when fully in effect. The tax cuts will be considered under the fast-track “reconciliation” process that only requires a simple majority in the Senate to pass. Everyday Minnesotans would pay for these tax cuts, either through immediate cuts to critical programs that help Minnesota families thrive, including health coverage, tax credits for low-income families, and basic assistance for poor seniors and people with disabilities, or in the future when dramatically higher deficits would ultimately force cuts to health care, education, infrastructure, and other building blocks of economic growth.
  • A rule change that would make it easier for the Senate to consider bills without a cost estimate from the Congressional Budget Office. The recent last-minute votes on health care proposals that would have caused deep harm to Americans’ access to health care underscore the need for full analysis of major legislation before policymakers take a vote. It is impossible for policymakers to make sound decisions and for the public to weigh in without having information in their hands.

Additionally, many of the Senate budget resolution’s provisions will likely push increased financial responsibility to the states. A recent economic update indicates that Minnesota may not be well positioned to meet the needs of Minnesotans if federal funding decreases.

The next step is for the Senate and the House, which passed its budget resolution in July, to reach agreement on a common plan. For insight into how this budget resolution fits in the federal budgeting process, check out the Minnesota Council of Nonprofits’ federal policy website and its federal budget tracker and appropriations infographic.

-Clark Goldenrod


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Many Minnesotans struggle to make ends meet while others prosper

income-inequality-blog-contrast-02Income inequality has gotten worse in Minnesota – and every state – over the past 50 years, and the highest-income households today hold a much higher share of total income, according to Census data. Even in the last decade, the share of income that has gone to the top 5 percent of households in Minnesota has risen. In 2006, their incomes were about seven times as high as the incomes of the 20 percent with the lowest incomes. By 2015, their incomes had grown to almost eight times that of low-income households.

Growing income inequality contradicts some of the country’s most deeply held values. Americans believe that hard work should pay off, that people who work full-time should be able to support their families, and that everyone should have the opportunity to succeed no matter their background. Income inequality can also be bad for the economy. When low- and middle-income households have a smaller share of the economic prosperity they help produce, it can dampen consumer spending, and slow down an important driver of economic growth.

Low-income households struggle to make ends meet and cover the costs of living. And while the cost of living is often lower in parts of Greater Minnesota, it can actually be even harder to make ends meet there. For example, in Hennepin County, low-income workers’ household incomes are $4,900 below the regional cost of living for one person, but low-income households in Mahnomen County earn nearly $10,000 less than what it costs for basic necessities.

Minnesota has some work to do so that all Minnesotans can get ahead in today’s economy. This includes improving wage and job quality standards, improving access to affordable health care and child care, and making sure workers can find housing and have transit and transportation options to get to where the jobs are. The ways we do that need to take into account the specific barriers facing Minnesota workers in each part of the state, but there’s no doubt that we need all workers to thrive for our state to thrive.

-Nathan Williams

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October economic update shows state revenues and expected economic growth down

This week’s October Revenue and Economic Update gave us somewhat unwelcome news about the state’s economic and budget landscape. The quarterly report from Minnesota Management and Budget (MMB) showed that recent state revenues have come in below projections, and national economic growth is expected to be slightly lower for the next few years than previously projected.

Some of the top takeaways from the Update include:

1. State revenues are coming in below projections. The state’s revenues for the first quarter of FY 2018 (July to September 2017) came in $66 million below projections; that’s 1.4 percent less than projected in the state’s February 2017 Economic Forecast. This is primarily due to lower income taxes received. One spot of good news is the state’s FY 2017 revenues. While preliminary estimates showed revenues coming in 0.5 percent below expectations, the final revenue numbers for FY 2017 are in and were right on target.

2. Slightly lower national economic growth projected over next few years. The national economic forecasters predict 2.2 percent national economic growth for 2017. Despite recent natural disasters, which have delayed economic growth, this is only slightly below the projection from the February forecast. Also, the state’s economic forecasters have changed their assumptions about federal policy action. Previously, the forecasters assumed that federal policymakers would enact tax reductions and increase infrastructure spending, which would boost growth in 2018. They have now removed those assumptions from the model they use to predict how the national economy will fare, bringing down expected growth in 2018 from 2.7 percent to 2.4 percent.



3. Unemployment nationally expected to remain low. Nationally, unemployment in September declined to 4.2 percent. The annual unemployment rate for 2017 is expected to be 4.4 percent, which is expected to improve slightly to 4.3 percent until 2020.

4. Despite uncertainty around federal policy changes, forecasters are fairly confident in their projectionsThe forecasters assign a 65 percent chance to their baseline forecast. They also give a 20 percent chance for a more pessimistic scenario and assign a 15 percent probability to a more optimistic scenario.

This week’s Update brings us reason for caution. At the federal level, policymakers are proposing serious funding cuts that will make it more difficult for Minnesota to continue to make the investments that strengthen our state and build shared prosperity. President Donald Trump, and the U.S. House and Senate have all put federal budget plans on the table that:

  • Significantly cut into annual non-defense appropriations, a substantial portion of which go to state and local governments;
  • Include massive cuts to health care funding, again much of which goes to states to fund Medicaid, which helps Minnesotans of all ages access the health care they need; and
  • Make deep cuts in assistance to low-income and middle class families through the entitlement portion of the budget, which includes SNAP food assistance, Supplemental Security Income for seniors and people living with disabilities, unemployment insurance, Pell grants and student loans. Again, some of these cuts would push funding responsibility to the states, and others would increase hardship among Minnesota residents and pressure for the state to respond.

This week’s update should give Minnesota’s policymakers pause. The budget that they passed in the 2017 Legislative Session left very little of the projected surpluses, even though there were warning signs that the job of meeting the needs of Minnesotans is likely to get a lot harder.

The next look at the state’s fiscal and economic health will come in early December with the release of the November Budget and Economic Forecast, which will give us a full picture of state revenues, expenditures and economic projections.

-Clark Goldenrod

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Minnesota’s Health and Human Services budget deal puts state fiscal stability at risk

Minnesota legislators put both the state’s balanced budget and Minnesotans’ health at risk with the Health and Human Services budget bill signed into law this session. The legislation cuts $463 million in general fund spending in FY 2018-19 for the portion of the budget that includes critical services for sick children, Minnesotans struggling with mental health issues or addiction, people with disabilities, and the elderly. The bill relies on fund transfers and various shifts to make up some of the difference. But it has left Minnesotans more vulnerable to federal policy changes, such as those that threaten access to affordable health care through the Children’s Health Insurance Program (CHIP), MinnesotaCare, and Medicaid.

Putting affordable health care in jeopardy with risky financial choices and a new layer of unnecessary bureaucracy

For over two decades, a 2 percent provider tax has generated revenue intended to fund statewide access to affordable health insurance. The revenue from the provider tax accrues in the Health Care Access Fund (HCAF). From there, it typically covers the state’s share of MinnesotaCare and a portion of Medical Assistance, health insurance options for Minnesotans who can’t afford the insurance offered by their employer or on the individual market.

Prior to the 2017 Legislative Session, the provider tax more than covered all of its commitments until FY 2021. As a result, a surplus built up in the HCAF. The surplus was projected to rise to $1.2 billion by FY 2021. This critical reserve could have helped offset any forthcoming federal cuts to health insurance assistance. It could have financed innovative new policies to connect even more Minnesotans with affordable health insurance, building on our past successes to ensure that fewer Minnesotans would need to choose between pay for a prescription and making a car payment.

Instead, the HHS budget bill nearly empties the HCAF, using those funds for existing services previously financed by the general fund and paying for the state’s high-risk pool for health insurers. As a result, the HCAF will have just $4.4 million available in FY 2021. This leaves Minnesota with fewer resources to respond if federal policymakers follow through on their plans to slash federal health care funding.

Making matters worse, policymakers left in place the scheduled cancellation of the provider tax in FY 2020. As a result, the HCAF will almost certainly face a deficit in FY 2022. Extending the provider tax would be a simple way for the state to maintain its commitment to affordable health care, and was included by Governor Mark Dayton in his budget proposal.

Minnesota policymakers also put low-income Minnesotans’ health coverage at risk by enacting a new paperwork barrier to affordable health insurance. Minnesotans who have already filled out forms to become eligible for Medical Assistance will now be subject to an additional verification program. If the experience of other states is any guide, this new program will likely result in people losing their health insurance even when they are eligible for assistance.

Shifting state costs to health care providers and counties

The bill includes a cut to the amount Medical Assistance pays to the providers of health insurance for low-income Minnesotans. The lower rates will make it harder for the insurers to find doctors and other health care providers who can serve low-income Minnesotans without taking a loss. That could mean reduced access to care for the more than 1 million Minnesotans who are covered by Medical Assistance, including many of our most vulnerable neighbors.

The bill also reduces funding to counties for assessments for long-term services for people with disabilities by $19 million in FY 2018-19. This policy change was included without any prior hearings on the impact of the funding shift.

Accounting gimmicks leave Minnesota more exposed to future risk

The bill delays payments to health insurers by a few months. On paper, that creates $173 million in “savings” for FY 2018-19 and $24 million for FY 2020-21. In reality, the state will need to make up for some of these savings by paying providers what they are owed in FY 2022-23.

Some progress made on improving Minnesotans’ access to affordable child care

Minnesota policymakers took a step in the right direction by removing a barrier to stability for families participating in the Child Care Assistance Program (CCAP). CCAP makes child care affordable for low- and moderate-income families. While the new HHS budget will not reduce the CCAP’s 2,000-family waiting list, it will invest $19 million in FY 2018-19 and $30 million in FY 2020-21 to make the program work better for child care providers and the families they serve.

Minnesotans deserve better

The HHS budget determines how Minnesota will support many of our most vulnerable neighbors — seniors, children, people with disabilities or struggling with addiction, and Minnesotans who have just plain had a string of bad financial luck. Given the state projected a $1.7 billion surplus for FY 2018-19, policymakers had an opportunity to thoughtfully invest in policies that would support these neighbors in their efforts to get ahead. In one especially disappointing example, policymakers chose to leave the Minnesota Family Investment Program cash grant amount stagnant for the 31st year in a row — meaning Minnesota’s most economically struggling families will still have to somehow try to make ends meet on a budget that won’t even cover the cost of rent.

By choosing disinvestment and budget gimmicks over investments in the everyday Minnesotans who face significant barriers to financial stability, the HHS budget doesn’t just miss an opportunity to make our state stronger. In a time of great uncertainty, it leaves our existing supports much more vulnerable to threats from the federal government.

-Ben Horowitz

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Most of federal framework’s tax cuts go to top 1 percent

The federal tax framework released last week fails to prioritize our nation’s working families. Instead, it would provide most of its tax benefits to the highest-income Americans and profitable corporations. And when we consider the deep cuts in health care, food assistance and other essential federal services that the tax plan would require, it’s clear this is a bad deal.

The large majority of the framework’s tax cuts would go to the highest-income Americans. Preliminary estimates from the experts at the nonpartisan Tax Policy Center are that, when the framework is fully in effect in 2027:

  • 80 percent of the net tax cuts would go to the 1 percent of households with the highest incomes; and
  • 40 percent of the net tax cuts would go to the 0.1 percent with the highest incomes. These households would get a tax cut of more than $1 million annually.


It’s not surprising the tax framework skews so heavily to the well-off; many of the plan’s centerpiece provisions provide the greatest benefit to those with high incomes. These provisions include:

  • Reducing the top individual tax rate from 39.6 percent to 35 percent;
  • Creating a new top rate of 25 percent for “pass-through income” – a type of business income that predominately goes to households with incomes over $1 million;
  • Repealing the estate tax, which is paid by 0.2 percent of the highest-value estates nationally;
  • Eliminating the Alternative Minimum Tax, which was designed to ensure that higher-income people with a large number of deductions and other tax benefits still pay a minimum level of tax; and
  • Cutting the corporate rate — most mainstream economists believe investors and CEOs would receive the bulk of the benefit from this policy change, rather than workers.

In contrast, American families who live paycheck to paycheck would receive only a small sliver of the tax framework’s benefits. The 40 percent of American households with the lowest incomes would receive only 5.2 percent of the tax cuts in 2018, and less than 4 percent when the plan is fully in place in 2027, according to the Tax Policy Center.

The tax framework offers a number of changes in the individual income tax in the name of simplification. But the framework would make little real difference in the average working-class person’s tax-filing experience, and could even result in a tax increase. The tax framework’s proponents laud its increase in the standard deduction and Child Tax Credit, but some families will find that any benefits from those provisions are reduced or even outweighed by the loss of personal exemptions and increasing the tax rate in the lowest tax bracket from 10 percent to 12 percent. The Child Tax Credit expansion and new credit for other dependents are structured in a way that means they aren’t available to our country’s lowest-income families.

The tax framework proponents’ claim that this plan will unleash strong economic growth relies more on wishful thinking than on evidence. Let’s set aside the question of whether it is fair for the wealthy and profitable businesses to see immediate and certain tax cuts while everyone else crosses their fingers and hopes for some kind of trickle-down economic benefit. Past experience with federal tax cuts and in states like Kansas shows that tax cuts aren’t a silver bullet for creating economic growth, especially when those tax cuts are combined with increasing deficits or cuts in public investments that support working families and build the economy.

What is certain is that we all would be harmed by the budget choices that come along with this tax plan. The tax framework is estimated to cost $2.4 trillion over the next decade. In the House, the budget vehicle that is being used to advance the tax framework calls for cuts in federal services that help families afford the basic necessities — such as Medicaid, Medicare, and food assistance through SNAP. And under the Senate’s budget framework, $1.5 trillion of the tax plan’s costs would be added to the deficit, creating additional pressure down the road on anti-poverty programs as well as other federal priorities from transportation to scientific research.

This unbalanced and fiscally irresponsible tax plan isn’t the way to build more broadly shared prosperity. Instead it would increase hardship and inequality. Policymakers should go back to the drawing board and make strengthening working families and our communities a priority, instead of draining critical resources from public investments that build a stronger economy.

-Nan Madden

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Join the Minnesota Budget Project team as our Policy Advocate

The Minnesota Budget Project is seeking a Policy Advocate to advance effective strategies to address poverty. This essential member of our team conducts analysis, explores policy solutions, and engages with state and national partners on public policies that reduce poverty and improve the economic well-being of low- and moderate-income Minnesotans and communities of color.

The Minnesota Budget Project is an initiative of the Minnesota Council of Nonprofits that combines sound research and analysis with advocacy, engagement, and communications strategies to expand opportunity and economic security to all Minnesotans. The Minnesota Budget Project is a member of the State Priorities Partnership, which provides strong peer-to-peer learning and professional development opportunities.

The ideal candidate will have a combination of advocacy and analysis skills. The full job description, including information about how to apply, can be found in our posting on the Minnesota Council of Nonprofits’ job board. The deadline to apply is October 11; resumes will be reviewed on a rolling basis.

-Nan Madden

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