Real Tax Impact

While we’re at the task of unraveling real-life consequences from symbolism, via Wonkbook’s Suzy Khimm the Tax Policy Center has weighed the “distributional effects” of the new tax bill and determined that those on every step on the income ladder will experience a net tax increase, but with those with income between $200k and $500k experiencing the least pain:

Taxpayers with income between $200,000 and $500,000 and those with income between $10,000 and $20,000, both of whom will see their tax rate increase by 1 percentage point—a smaller hike than any other income group. Even those earning less than $10,000 will see a bigger 1.3 percentage point rate hike.

It’s that 200-500k group, of course, that might have had the highest percentage increases under the proposals long championed by the president, which also had strong public opinion support. But since this category of taxpayers didn’t see an income tax increase, and is less vulnerable to the payroll tax increase that hit all wage or salary earners (since the Social Security portion of the payroll tax only affects the first $113,000 in earned income), they did well, as Khimm tartly notes:

In fact, most of those in the $200,000-$500,000 range dodged a major bullet when legislators agreed upon on a $450,000 threshold rather than the lower $250,000 level that President Obama was pushing for. By comparison, those with income between $500,000 and $1 million will see their taxes go up 2.2 percentage points and those above $1 million will see a 5.2 percentage point hike. So those upper-income Americans whom Congress has deemed to be “middle class” arguably got the best deal under the entire bill.

That’s not entirely due to Republican leverage or Obama’s “weakness,” by the way. This is precisely the category of taxpayers that some Democrats–particularly those from high-income, high-cost-of-living states like New York, plus rural areas where some farmers who insist on paying taxes at individual rates fall into this bracket–were worried about. But genuine middle-class folks, and the working poor, didn’t get treated as well.

Ed Kilgore

Ed Kilgore, a Monthly contributing editor, is a columnist for the Daily Intelligencer, New York magazine’s politics blog, and the managing editor for the Democratic Strategist.