WV Center on Budget and Policy > Blog > Taxes > Impact of Senate Tax Plan Changes Little From House Plan, Still Overwhelmingly Benefits the Wealthy

Impact of Senate Tax Plan Changes Little From House Plan, Still Overwhelmingly Benefits the Wealthy

The U.S. Senate has released their version of the Tax Cuts and Jobs Act. While the bill has some differences from the version released by the House, its overall affect is largely the same, with the benefits heavily favoring the wealthy. The Senate’s tax bill  would raise taxes on some families while giving large tax cuts to wealthy Americans and foreign investors. In West Virginia, 34 percent of the federal tax cuts would go to the richest five percent of residents, and six percent of households would face a tax increase, once the bill is fully implemented.

Middle-class West Virginians would receive only 10 percent of the benefits of the tax reform by 2027, according to an analysis from the Institute on Taxation and Economic Policy. The middle fifth of West Virginians would receive only half of the benefits going to the top one percent of West Virginians.

While some households at each income level would face a tax increase, the average impact on each income group would be a tax cut. But the average tax cut for the richest one percent of West Virginians — $18,860 in 2019 and $21,390 in 2027 —would be vastly larger than the average tax break for any other group. The middle fifth of income earners in West Virginia would receive an average tax cut of $350 in 2019 and $470 in 2027.

The wealthiest West Virginians aren’t receiving the largest tax cuts simply because they have most of the income. Instead, the tax plan favors them heavily. Even when measured as a share of income, the tax cuts for the richest one percent of West Virginians are more than twice the size of the than the tax cuts for the middle class.

While the average impact of the plan on each income group is a tax cut, some households in each income group would pay higher taxes under the plan. Overall six percent of West Virginians would pay more in taxes. For some income groups the share of taxpayers with a tax increase is higher or lower, one reason for the variation is that state and local taxes  would no longer be deductible on federal tax returns under the Senate plan. This has a significant effect on many middle-income and upper-middle income households in some states.

 

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