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Neighbors Growing Together | Oct 18, 2017

Report: Richest Iowans would benefit most from GOP tax plan

Oct 05, 2017

By Ed Tibbetts, Quad-City Times

 

A new study says half the savings in Iowa from the Republican tax plan outlined last week would go to the richest 1 percent at first and rise over time, while a chunk of people in the state would pay more in taxes.

The study, by the Institute on Taxation and Economic Policy, said that the richest households in Iowa, those with annual incomes of about $440,000 and up, would save $50,050 on average in 2018 and see an increase of 4.3 percent in their incomes.

The average middle-income household, meaning those making between $42,000 and $64,000, would save $340 on average, increasing their incomes by 0.6 percent, the study said.

“What we’re seeing is massive tax cuts for millionaires and billionaires and mystery meat for the middle class,” said Seth Hanlon, an economic policy adviser in the Obama administration official and now a senior fellow at the Center for American Progress, a Washington, D.C.-based non-profit that says it’s “a voice for tax fairness.” It was founded in 1980. Hanlon and several others critical of the tax plan took part in a conference call Wednesday aimed at publicizing estimates of how the plan would affect people in Iowa.

The tax plan, a wide-ranging effort of the Trump administration and GOP leaders in Congress, was released a week ago. It would reduce the corporate tax rate, change the way small businesses pay taxes, cut the number of individual income tax brackets from seven to three and double the standard deduction while eliminating other exemptions.

It also would end the estate tax.

Proponents say the plan would deliver tax cuts to people across the income spectrum and it would, in many cases, allow people to file their taxes on a postcard.

Since the plan’s release, a handful of analysts have tried to determine its impact on income groups. The institute’s estimates are just the latest.

In addition to saying most of the benefits would go to upper income people, the study estimated that 12 percent of Iowa households would pay higher taxes in 2018.

A fifth of middle income households would face higher taxes, the report said.

The change would mostly come because of revisions the rules for standard deductions and exemptions, the report said.

“Families who itemize their deductions (rather than claiming the standard deduction) may pay higher taxes because the framework repeals most itemized deductions, including the deduction for state and local taxes,” the report said.

The report comes as the Senate Budget Committee was taking up its 2018 budget resolution.

Organizers of the conference call noted that Sen. Chuck Grassley, R-Iowa, is a member of the panel.

Many of the details of the GOP tax plan still are missing, so analysts have had to make assumptions about how those would be filled in by Congress.

Still, that some Americans might actually pay more taxes is likely to give lawmakers pause.

On a conference call Wednesday, Sen. Chuck Grassley, R-Iowa, said, “I don’t want taxes to be raised on the middle class.”

However, he conceded, in some circumstances, “I suppose there could be” somebody with a lower income who could see an increase because of changes to deductions and exemptions.

Grassley, though, suggested mostly that would be confined to wealthier tax payers.

“You’ve got to look at the overall goal of what we’re trying to accomplish to make taxation much fairer, simpler — as a postcard would indicate — and to make our economy more competitive,” he added.

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