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The Senate Republican tax bill does not look good for the working class at all

In this Thursday, June 1, 2017, photo, Silvia Ruiz prepares a specialty sandwich at a McDonald's restaurant in Chicago.
AP Photo/Charles Rex Arbogast
Not the top priority.
  • Tim Fernholz
By Tim Fernholz

Senior reporter

Published Last updated This article is more than 2 years old.

The US Senate’s new tax bill will mean lower incomes on average for the working class, especially after temporary breaks expire in 2025, according to a new analysis by the Center on Budget and Policy Priorities (CBPP):

Scoring the senate bill is tricky because it not only cut taxes, but also eliminates the requirement that Americans purchase health insurance. Lawmakers added in that last provision not just because they oppose the rule, but because scrapping it will save the government hundreds of billions of dollars in payments that help low-income people afford health insurance. That, in turn, will make the overall cost of the bill small enough to pass the senate without any Democratic votes.

CBPP has combined estimates of the tax law changes and the health policy shift to create the chart above. In 2025, the combination will mean a lower income for the average American earning less than $40,000. However, many of the benefits for individuals will expire after 2025, so by the time the law is fully implemented, Americans earning less than $75,000 will have a lower income because of it. Most of the benefits in the legislation accrue to the wealthiest Americans.

Republicans, like senator John Cornyn, dispute this analysis because they say the subsidies provided to people who opt-out of health insurance shouldn’t count as income. The problem is that not all of the losses will be for people who opt out: Removing the individual mandate means that fewer healthy people will sign up for insurance, so the Congressional Budget Office expects the cost of individual health insurance to rise by 10%. And people who don’t have insurance could still wind up paying out-of-pocket if they become ill, which can be ruinous.

As with any estimate of a complex piece of legislation in a complex economy, there is plenty of uncertainty. Backers of the bill argue that corporate tax cuts will lead to increased wages and counteract these effects, but the magnitude of the increase is subject to debate, especially because of the $1.5 trillion increase in public debt this bill will create. Still, nearly every estimate by the Joint Committee on Taxation have shown more revenues coming from the working class and less from the highest-earning Americans.

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