Thanks to our friends at the Institute on Tax and Economic Policy, we have new data on the impact of the tax changes in the Build Back Better plan that is under consideration in the House of Representatives as I write.
The first table looks at the average change in taxes for families in seven income groups that would occur as a result of all the provisions of the bill as well as due to different parts of the bill—the corporate tax changes, the income tax increase for some individuals, the state and local tax (SALT) cap adjustment, and the Child Tax Credit and Earned Income Tax Credit. As you can see, those in the bottom 20% of families, with an income under $22,400 and an average income of $12,900 will save an average of $1,070 a year. Every group above them receives a smaller average tax cut except the group from the 95th to the 99th percentile, making between $275,700 and $646,500. They will get an average tax cut of $2,090, largely due to the impact of the SALT cap adjustment. But the top 1%, with an income above $646,500 and an average income of $1.8 million, will pay an average of $9,500 more per year in taxes.
The second table looks at the average change in taxes in each group as a percentage of the average income in each group. The bottom 20% of families, with an income under $22,400 and an average income of $12,900, will save an average of 8.3% in their taxes. All income groups above them, except the top 1%, will receive a gradually smaller percentage cut in their taxes. But the top 1% will pay .5% more in taxes.
The Build Back Better plan is one of the most progressive changes in the U.S. tax system in our history. And, of course, most of the benefits of the programs funded by these taxes benefit the bottom 80% of families. It is strikingly different from the Trump tax cut of 2017 in which most of the benefits went to the top 1% of Pennsylvanians.bbb taxes revised