A post circulating in liberal corners of social media urges Republicans to portray President Joe Biden as someone who will impose huge tax hikes.
“Wait, so Trump passed a bill in 2017 that would allow people on less than $ 75,000 to raise their taxes in 2021 and every two years thereafter through 2027 … as the rich get richer … and you cry about Biden collecting taxes on people over 400k. What am I missing … “the post said.
The post was featured as part of Facebook’s efforts to combat false news and misinformation in its newsfeed. (Read more about our partnership with Facebook.)
Claims of impending tax hikes under the 2017 law were reinforced on February 1 when liberal group Occupy Democrats posted them on their Facebook page. There were at least 25,000 responses over the next three days.
When we looked at this, we found that the notion of an ongoing series of tax increases enshrined in the GOP-backed law is misleading. (We checked with Occupy Democrats, but we didn’t hear about it.)
In general, analyzes of the 2017 law by independent groups have found the opposite of what is in the post: at least by 2027, when much of the tax cuts have expired, all income groups will see a reduction in taxes (or an increase in after-tax income ).
In their “distribution tables” – the analytical charts that show how much a typical taxpayer in a given income bracket sees their after-tax income rise or fall under the law – both the Urban Institute-Brookings Institution’s Tax Policy Center and Tax Foundation concluded that taxpayers across the income spectrum will be better off than usual under the 2017 law by 2027. Some income groups save more money than others, and results for individual taxpayers will vary based on their type of income. These tables are based on average values.
However, there is an analysis by the Joint Tax Committee of Congress that does not show this pattern and on which the agency relies.
The discrepancy results from a difference in the assumptions that went into each analysis. In contrast to other analyzes, the Joint Committee has taken into account the legal provision to eliminate the tax penalty for lack of health insurance, and it has done so in a non-intuitive way.
According to the longstanding policy of the committee, the elimination of this penalty will be treated as a net tax increase rather than a net tax.
Why? The logic is that without a mandate for health insurance, more people would forego buying from the marketplaces established under the Affordable Care Act. As a result, fewer people would receive the tax subsidies that come with purchasing insurance in the marketplaces. These subsidies are designed to help people afford their insurance premiums.
The practical effect of this analytical approach is that in the distribution tables for some low and middle income groups, income gains from the 2017 Tax Act disappear – a sharp contrast to the conclusions of the Tax Policy Center and Tax Foundation.
As an example, here is the table of the Joint Tax Committee, in which the tax burdens in 2023 before and after the passage of the law are compared:
The graph shows that most income groups will see a tax cut in 2023 due to the law, but both the collective tax burden and the average tax rate will increase for households with incomes up to $ 30,000.
The same pattern will apply in 2025 and this year will extend to taxpayers making up to $ 40,000. And in 2027, after a host of tax cuts expire on the bill, the number of taxpayers will expand to include those earning up to $ 75,000.
Tax experts say the Tax Policy Center and Tax Foundation’s approach – which ignores the change in health insurance penalty – is a more accurate reading of the tax rates set out in the 2017 law.
The decision-making process leading to fewer tax subsidies doesn’t mean “their taxes will be increased,” as the Facebook post said.
“While it is important to consider the impact of (tax law) on tax credits and health insurance utilization, it is misleading to refer to this effect as a ‘stealth tax increase’,” wrote Garrett Watson in a post for the Tax Foundation where he is a Senior Tax Policy Analyst. “The decline in premium tax credits has nothing to do with a change in tax rates or the generosity of tax credits under the Affordable Care Act, but rather with voluntary decisions that individuals make about whether to purchase quality health insurance.”
The Post said: “Trump passed a bill in 2017 that would allow people on less than $ 75,000 to raise their taxes in 2021 and every 2 years through 2027 thereafter.”
The tables produced by the Joint Tax Committee suggest that after-tax incomes will decrease for some income brackets, but it is misleading to say that this amounts to an increase in taxes.
These tax increases are included in the tables because the committee concluded that the abolition of the individual health insurance mandate would result in people foregoing insurance and reducing the tax subsidies they would have received to pay their premiums.
In contrast, at least two other independent groups have ignored the impact of this provision in their analyzes and have concluded that each income group will benefit to some extent from the tax law each year through 2027.
We mostly rate it as wrong.