For the next couple of years, most middle class/ poor peoples will benefit from some tax cuts. All of the tax cuts will end by about 2025. These tax cuts for the middle class and the poor are not permanent whereas those for wealthier Americans were made permanent.
Republicans have countered this reality with the talking point that this can be fixed at a later date. They don’t seem to understand why their word isn’t of much comfort.
Because the republicans eliminated the Obamacare mandate as part of their 2017 tax cuts bill, the CBO forecasts that the repealing the individual mandate will cause premiums in nongroup markets to rise significantly. Starting in 2018 for the year 2019, this increase in premiums will offset any tax cuts benefits that some (millions) average folks would see when they do their IRS tax returns for income earned in 2018.
See these articles for more information about the 2017 tax cuts bill : GOP tax plan: What did and didn’t make it into the final bill – Vox and A Guide to the Tax Changes – FactCheck.org
Here is the the way republicans managed to insert a really big permanent tax increase for middle class/ poor peoples in their 2017 tax cuts bill…(It’s about adjusting the tax bracket index. Because of the way tax brackets work, the tax increases brought on by chained indexing will be bigger in percentage terms for those near the bottom of the income distribution curve than for those at the top.)
Here is the rest of the story…
On December 20. 2017, Justin Fox of Bloomberg penned the following report, “The Big, Permanent Tax Increase Inside the Tax Cut Act”
“It was not a signature element of Ronald Reagan’s 1980 campaign or of the tax-cutting plan his administration unveiled in 1981. Several Republican lawmakers (among them Senate Finance Committee Chairman Bob Dole of Kansas) pushed hard for it, and Reagan agreed to include it in the Economic Recovery Tax Act of 1981.”
Indexation is the fairest tax reform in many years. To tamper with it is to betray a trust.
“So anyway, you’ll never guess what the legislation formerly titled the Tax Cuts and Jobs Act of 2017 does! It tampers with indexation! I wouldn’t exactly say that the change is betrayal of a trust, but it is a tax increase that will get bigger and bigger over the decades, and it will weigh heaviest on those in lower tax brackets. Unlike most other individual income tax changes in the new law, it is permanent, and given its positive revenue implications, it is hard to imagine any future Congress rolling it back.”
“ ” Without indexing, inflation brings a steady decline in real government benefits and a rise in real tax rates. In other words, it makes it possible for Congress to pass tax cuts and add new government programs without busting the budget. This worked brilliantly in the 1960s, when inflation averaged 2.6 percent a year; in the 1970s (average inflation rate: 7.2 percent), Social Security recipients and taxpayers — aka voters — began to notice what was going on. The gig was up, and after inflation indexing was implemented for benefits, tax brackets and, in 1997, some Treasury securities, the political rewards to inflation declined. Perhaps not entirely coincidentally, inflation did, too.”
“There were concerns, though, that the consumer price index maintained by the Bureau of Labor Statistics wasn’t measuring inflation correctly. This seems to have first come up in the measurement of gross domestic product. Inflation-adjusted or “real” GDP is the most watched measure of economic growth, and adjusting GDP with an inflation index such as the CPI that’s based on a fixed basket of goods probably skews it. I’ll let Federal Reserve Bank of St. Louis economist Kevin Kliesen explain:”
First, the structure of the economy — meaning the relative prices and types of goods and services produced — changes significantly over time. For example, think of the advent of the Internet and the products and services now offered online. Second, these relative price changes cause corresponding changes in the purchasing patterns of consumers. If, for instance, technological innovations lower the cost of producing a product, which should then lower its selling price, the quantity demanded of that product should increase and, accordingly, its importance in the calculation of GDP should increase.
In 1992, after years of discussion and research, the Commerce Department’s Bureau of Economic Analysis began calculating an alternative GDP with a “chained” measure of inflation that attempted to reflect these changes in economic structure and consumer purchasing patterns. In 1996 it (was) the main measure of real GDP.
“The Boskin report, “Toward a More Accurate Measure of the Cost of Living,” estimated that the CPI overstated inflation by 1.1 percent a year. It also recommended that the BLS “move away from the assumption that consumers do not respond at all to price changes in close substitutes” and concluded that “Congress and the President must decide whether they wish to continue the widespread overindexing of various federal spending programs and features of the tax code.” In response, in August 2002, the BLS began publishing an alternative inflation measure called the Chained Consumer Price Index For All Urban Consumers, or C-CPI-U, and ever since then politicians in Washington have been talking about switching to it for the indexing of spending programs and tax brackets.”
Now, however, congressional Republicans have inserted chained CPI into the tax code — and don’t be surprised if they try to force it on Social Security next year.”
The argument that chained CPI is a better measure of the cost of living than the unchained version seems pretty legit. Still, switching to chained CPI does have consequences. In the case of the tax code, it amounts to a stealthily growing tax hike — increasing taxes by just $800 million next year but by $31.5 billion in 2027, according to the Joint Committee on Taxation. The total increase over the next decade is $133.5 billion, in a bill that cuts taxes by $1.5 trillion over that period. In the decade after that, switching to chained CPI will bring in almost $500 billion in additional revenue, estimates the Urban-Brookings Tax Policy Center. And the amount will just keep going up.”
As someone who has complained frequently about the negative revenue implications of the tax bill, I shouldn’t gripe too much about one of its most fiscally responsible provisions. But it does seem important to note that, because of the way tax brackets work, the tax increases brought on by chained indexing will be bigger in percentage terms for those near the bottom of the income distribution than for those at the top. According to a 2013 analysis by the Tax Policy Center, taxpayers in the second income quintile (currently those with cash incomes of $25,000 to $48,600) would see the biggest percentage increases, with their tax rate going up by 0.4 percentage points and their after-tax income declining by 0.4 percent 15 years after a switch to chained CPI. Meanwhile, those in the top 0.1 percent of the income distribution (incomes above $3.4 million) would see average percentage changes of effectively zero.
It’s not a huge tax increase for anybody, unless you extrapolate into the next century. But it is a tax increase, it is regressive, and it is probably never going away.