Here is Gary Cohn—supposedly one of the “smart ones” in the Trump administration—explaining the president’s tax plan:
The median income in the United States today is … about $56,000. You take the $24,000 away from the $56,000, you’ve got taxable income of $32,000. At a 10% rate that’s $3,000 of tax. If you have one or two or three children and we give you $1,000 tax credit, you could end up with a—you know, very marginal, single-digit tax rate to no taxes whatsoever. That, to me, is a middle-income tax cut because you’re going to owe no taxes potentially.
“Potentially” is doing a lot of work here, as David Kamin explains:
Cohn forgot to mention the fact that our tax system, as it is currently written, provides what are called “personal exemptions” to families….The plan Trump presented on the campaign trail would eliminate these personal exemptions….So when you take into account the elimination of personal exemptions, families aren’t actually getting much tax relief after all. In fact, if that family has two or more kids, they’d actually face a tax increase under the Trump plan described by Cohn.
Here this is in chart form:
This should come as no surprise. The problem is that the average family pays most of its taxes at the state and local level, and via payroll taxes. Their federal income tax rate is already “very marginal, single-digit tax rate to no taxes whatsoever,” so it’s all but impossible to cut it. This is from the Tax Policy Center:
The bottom 40 percent pays no federal income tax at all and the average middle-class person pays 6.4 percent of their earnings in federal income taxes. If you focus solely on the federal income tax—as Republicans always do—you can’t help the middle class much. Even in theory, the only people who really benefit are high earners.
Of course, you can still do a little to help middle-class workers—but only if you’re careful. Cohn wasn’t careful, so he ended up increasing middle class taxes. It’s an easy mistake to make.
