Who benefits from tax legislation so far
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So much for taxing the rich: House Republicans late Sunday unveiled $880 billion in Medicaid cuts, the cost-saving center of their hotly anticipated tax legislation.
- That follows a preliminary partial draft released earlier in the weekend from the House committee that oversees taxes, with cuts for the upper-middle class and wealthy.
Why it matters: There is still much to be decided and negotiated, but these drafts provide clues about who's to benefit from the coming "big beautiful" bill.
- The Medicaid cuts include work requirements that will likely lead to higher hurdles for folks on the program. It's a way to reduce benefits without outright eliminating them.
- Republicans want to extend the 2017 Tax Cuts and Jobs Act, which is set to expire, and do some additional cuts. But the realities of their slim majority are not going to make it so simple.
Zoom out: The idea of taxing the rich seemed to be on the table last week, but there's no sign of it in the draft.
- It includes some goodies for the rich, as well as a few things that would benefit more modest earners, but those are temporary.
What's in it: The draft legislation would extend the cuts in the 2017 tax bill, and it adds on some more breaks.
- Some will benefit the wealthiest, including a permanent increase to the deduction for pass-through income to 22% from 20%, plus a hike for the estate tax exemption, which would shield more inheritances from taxes.
- Others are more targeted for the middle- and upper-middle class. Notably, the draft would boost the standard deduction for four years to $16,000 for individuals from $15,000, and $32,000 for married couples from $30,000.
- It would also temporarily raise the child tax credit from $2,000 to $2,500 per child. That will not do anything for families who already too poor to take advantage of the full tax break, an issue targeted temporarily in 2021.
- This proposed increase effectively leaves out 17 million children, per an estimate from Bobby Kogan, senior director of federal budget policy at the left-leaning Center for American Progress.
The intrigue: The increase in the child tax credit comes with a big hitch.
- To claim it parents must have Social Security numbers, meaning the U.S. citizen children of undocumented parents would not receive the break.
- 4.5 million U.S. citizen kids would likely lose out, per a recent estimate.
Between the lines: President Trump has proposed eliminating taxes on tips, overtime pay and Social Security benefits. None of this is mentioned in the draft.
- It also does not mention the state and local tax deduction, better known as SALT. The current cap on SALT has been one of the most hotly contested tax breaks among Republicans.
- More details on these items could drop as soon as Monday, observers say.
What they're saying: Republican lawmakers framed the Medicaid changes as a way to target "fraud and abuse" and preserve the program for those who are unable to work.
- Rep. Brett Guthrie (R-Ky.) wrote in a Wall Street Journal opinion piece on Sunday that "Washington can't afford to undermine the program further by subsidizing capable adults who choose not to work."
As it stands, the draft released would add $5 trillion to the primary deficit through 2034, according to a weekend analysis from the Committee for a Responsible Federal Budget, close to $2 trillion more than current policy.
- "So far this costly bill appears to double down on trickle down, with huge tax cuts that will further enrich the rich and not much for the rest of us," Amy Hanauer, the executive director of the Institute on Taxation and Economic Policy, said in a statement over the weekend.
- "The top 0.1% of Americans get more from this tax bill than the bottom half of America combined," Kogan, a former Office of Management and Budget staffer, told Axios over the weekend.
What's next: The full committee is set to debate and advance legislation on Tuesday.
