Paul L. Caron

Tuesday, December 5, 2017

Tax Policy Center: Comparing Current Law And The House And Senate Versions Of The Tax Cuts And Jobs Act

Tax Policy Center, Comparing Current Law and "Tax Cuts and Jobs Act," 2018:



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What impact does the new tax law have on muni bonds?

Posted by: W. Simm | Dec 5, 2017 5:43:40 PM

TPC's distributional analysis (at fails to show percentage change in income tax liability, which is the traditional measure of tax reform. Instead TPC focuses exclusively on percentage change in after-tax income, which is the view favored by progressives. It's a perfectly reasonable view but it's not traditional and it's certainly not the only reasonable view.

However if you take the ratio of the last two columns of Table 1 you can estimate the fractional reduction in income tax liability by income group. The lowest two quintiles see a reduction of more than 10%. The other quintiles have smaller reductions. The tax package is therefore distributionally neutral as viewed conventionally.

It's almost as if TPC changed its presentation of results so that its readers would not realize that each group's taxes are being cut by similar percentages, with smaller percentage cuts at the top. TPC risks damaging its reputation by showing only a non-traditional, progressive-favored view of the data. That's not the TPC that I grew to know and love.

Posted by: AMTbuff | Dec 5, 2017 2:43:07 PM