Activist groups and their congressional surrogates are trying to derail recently proposed federal tax cut legislation by falling back on their favorite messaging tactic of calling it a gift to the rich.
The tax plan “helps the rich at the expense of the middle class,” said Senate Minority Leader Chuck Schumer.
The tax plan pursues “donors’ interests at the expense of working families,” huffed Massachusetts’ Sen. Elizabeth Warren.
But saying it doesn’t make it so. Overheated rhetoric notwithstanding, the biggest beneficiaries of proposed federal tax cuts are the middle class and small businesses.
The House tax bill will double the income threshold under which families pay zero tax to $24,000. It would roughly double the child tax credit, making the increasing costs of child care a little more manageable for working families.
The bill eliminates the 15 percent tax bracket, meaning hardworking families pay just 12 percent on their next $90,000 of income. Previously the 15 percent tax bracket kicked in at just $18,650 after deductions.
The plan also calls for a special 9 percent rate on small businesses’ first $75,000 of earnings — a 40 percent marginal tax cut. This special rate only applies to businesses with $150,000 or less in total annual earnings to ensure the rich don’t benefit.
These changes alone would save ordinary families and small businesses thousands of dollars a year. A family of four earning $59,000 will save roughly $1,200 a year from the tax plan.
This is not chump change. According to a recent Federal Reserve survey, nearly half of Americans cannot cover an unexpected $400 expense like a health care bill or car repair. Four in five American workers live paycheck to paycheck. These tax proposals would bring these hardworking Americans much-needed breathing room.
Other middle-class taxpayers would save thousands of dollars more from the tax bill’s vast expansion of the 25 percent tax bracket and the elimination of the 28 percent bracket. This would keep more money in American communities where it can create economic growth, job opportunities and wage hikes.
The bill also has several additional proposals to help small businesses, which account for half of all jobs and two-thirds of new jobs. It would create a new top marginal small business tax rate of 25 percent, spurring hiring, expansion and wage growth. It would allow for immediate expensing and full deduction of interest costs, making expansion and capital investment easier.
These provisions would strengthen the country’s middle-class and small business backbone, which have been weakened by years of over-taxation. Even the left-of-center Washington Post Fact Checker gives the claim that working families won’t benefit from the tax bill “four Pinocchios” — signifying the most egregious lie possible.
It’s true the rich will benefit somewhat from the tax bill. Their top marginal tax rate remains at the current 39.6 percent, but the income threshold where it kicks in is raised to $1 million.
These relatively minor savings, as a percentage of taxes paid, do not match the impact of the savings enjoyed by middle-class families and small businesses.
So next time you hear that tax cuts are just a giveaway to the rich, consider the source.