TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Thursday, July 12, 2018

$111 Billion In Tax Cuts For The Top 1%

Following up on yesterday's post, Tax Cuts Under Bush, Obama & Trump Have Increased Ineqality:  New York Times op-ed:  $111 Billion in Tax Cuts for the Top 1 Percent, by David Leonhardt:

More inequality? Yes, please. Federal tax policy in the 21st century has been like a tug of war. Thanks to President Trump, the rich are winning it once again.

The top-earning 1 percent of households — those earning more than $607,000 a year — will pay a combined $111 billion less this year in federal taxes than they would have if the laws had remained unchanged since 2000. That’s an enormous windfall. It’s more, in total dollars, than the tax cut received over the same period by the entire bottom 60 percent of earners, according to an analysis being published today.

Think of it this way: Income inequality has soared in recent decades, with the wealthy pulling away from everyone else and the upper-middle-class doing better than the working class or poor. Yet our federal government has responded by aggravating these trends. It has handed huge tax cuts to the small segment of Americans who need those tax cuts the least. ...

ITEP

Despite the depressing overall picture, I found one part of the report to be encouraging: It shows that raising taxes on the rich — to combat the extreme current level of inequality — really is possible. President Barack Obama did so in his second term, reversing most of George W. Bush’s tax cuts on the top 1 percent. But then Trump won the White House, the Republicans kept control of Congress and they went even further in cutting high-end taxes than Bush had.

Elections have consequences. And on taxes, as on so many other subjects, our two political parties have fundamentally different positions.

Vox, America’s Getting $10 Trillion in Tax Cuts, and 20% of Them Are Going to the Richest 1%

https://taxprof.typepad.com/taxprof_blog/2018/07/111-billion-in-tax-cuts-for-the-top-1.html

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Comments

Tax cuts never should be about equality, but letting those who pay taxes keep more of what they earned and is theirs. But, it's not like tax cut savings are talents that get buried in the ground, but they are invested and spent within the economy, which multiplies more than wasted by Washington.

Posted by: Woody | Jul 12, 2018 11:05:17 AM

Given that the top 1% pays almost 40% of personal income taxes, the distribution of cuts means that the wealthy get a smaller percentage reduction than the cohorts below them. If you take the author's view to its logical conclusion, there should never be tax cuts at all since a significant percentage of filers pay no taxes and will receive no benefit from any cut in taxes

Posted by: PaulB | Jul 12, 2018 3:42:24 PM

@ Paul, the sad part is you have to point out the obvious. Of course, the wealthy will get the biggest portion of any tax cut because they are paying the most taxes. Duh!

Posted by: Dale Spradling | Jul 13, 2018 6:12:56 AM

Didn't the liberal elite demand a reduction in the top rate to help them offset the loss of state & local deductions?

Posted by: Steve | Jul 13, 2018 6:53:27 AM

"The top-earning 1 percent of households... will pay a combined $111 billion less this year in federal taxes than they would have if the laws had remained unchanged since 2000."

Now, what's wrong with this contorted, dubious, oddly worded statement? Uh, tax policy has changed quite a bit in the last 18 years, and Trump wasn't President for 16 of them!

Editorically, though, Old Lady Gray certainly hasn't changed in all that time...

Posted by: MM | Jul 14, 2018 9:59:29 AM