Blog Post

The Reality Does Not Match the Rhetoric of the House Republican Tax Plan

This June, Speaker Paul Ryan led House Republicans in releasing the first part of a six-pronged policy platform, a so-called “anti-poverty” plan. The plan included discussion and concern about how thirty-four percent of Americans raised in the bottom fifth of the income scale are unable to move up the income ladder. But as we examined previously, the reality of the plan is that it is highly unlikely to fight poverty and far more likely to increase it. More recently, Speaker Ryan released the final prong of his policy platform—his vision for tax reform—and once again, the reality of the impact of the plan does not meet the rhetoric.
The House Republican tax blueprint states as its goals that it will make the tax code “fairer” and that it will “deliver opportunity for all Americans.” But a closer examination shows that the House GOP plan is similar to many other recently released Republican plans, including that released by Republican presidential candidate Donald Trump, in that it would give the biggest tax cuts to the wealthiest households, while leaving low-income families and women by the wayside. The House Republican plan would reduce the top statutory tax rate for individuals to 33 percent, reduce the top statutory corporate  tax rate to 20 percent, and repeal the estate tax, even though doing so would benefit the estates of only the wealthiest 0.2 percent of Americans. Meanwhile, House Republicans go further than Mr. Trump on capital gains and dividends income tax, lowering the top tax rate from 20 percent to just 16.5 percent. That proposal would disproportionately favor the wealthy—nearly 75 percent of the tax benefits from reducing capital gains and dividends tax rate goes to those making over $1 million. The Citizens for Tax Justice estimates that the House Republican plan would give 60 percent of the share of the tax cuts to the wealthiest 1 percent of Americans.
While the House Republican plan is filled with big giveaways to wealthy individuals and big corporations, low-income women and families see little of the benefit. The Citizens for Tax Justice estimates that households at the bottom 20 percent of the income scale would receive only 1 percent of the share of the tax cuts. Moreover, the House Republican plan is particularly disappointing for walking away from Speaker Ryan’s proposal to expand the Earned Income Tax Credit (EITC) for childless workers. Instead, the House Republican plan merely states that they will reform the EITC to reduce waste, fraud and abuse and continue to develop options to incentivize work. This is a missed opportunity to help millions of low-income workers. The EITC encourages and rewards work by boosting the wages of low-income workers, lifting millions of families out of poverty each year. However, the EITC provides little or no help to workers without qualifying children. Expanding the EITC for childless workers would help millions of workers, including millions of women, who make up two-thirds of low-income workers. The House Republican plan, however, is silent on this important proposal that has been garnering bi-partisan support.
Additionally, although House Republicans propose allowing a second non-refundable tax credit of $500 for children and non-child dependents, taxpayers would be required to provide a Social Security number to claim it. This directly harms immigrant taxpayers who file their federal taxes using an Individual Taxpayer Identification Number. It makes little sense to deny immigrant parents the ability to claim tax credits for their children, many of whom are citizens.
Instead of giving the largest share of the tax cuts to the wealthiest Americans,  House Republicans could truly deliver opportunity for all Americans by helping meet the needs of American families. For example, given that child care costs take a significant bite out of family’s budgets , the House Republican plan misses an opportunity to improve families’ economic security by improving the Child and Dependent Care Tax Credit (CDCTC) and making it refundable.
Although House Republicans wrap their tax plan in sunny rhetoric about helping “all Americans have more and better opportunities in their lives,” in reality, their plan appears more concerned with helping the wealthy few and big corporations. If House Republicans are serious about helping all Americans instead of just the wealthy few, they would embrace measures that help low-income workers, women, and their families, such as expanding the EITC for childless workers and strengthening the CDCTC.