GOP-Trump tax framework: Windfall for Ohio’s top 1%, little for the rest
Posted October 06, 2017 in Press Releases
A 50-state analysis of the GOP tax framework reveals the richest 1 percent of Ohio taxpayers would get a tax cut with an average value of $56,280 a year in 2018. Most other Ohioans would see modest benefit. Some would pay more.
The analysis, done by the Institute for Taxation and Economic Policy, is based on the framework for proposed changes to the tax code released on September 27 and looks at impact by income group in 2018. The framework leaves many unanswered questions, so assumptions in the analysis are based on changes proposed by Donald Trump during his presidential campaign and/or on plans put forth by Congressional Republications.
The analysis shows that people with higher incomes receive higher tax cuts. In Ohio, cuts range in size from just $60 or .5 percent of pre-tax income for the lowest-income 20 percent of earners, to 3.7 percent for the top 1 percent. Almost nine out of 10 of the richest 1 percent would get a cut. These taxpayers, who make at least $483,000 a year, together would receive 57.5 percent of the statewide tax benefit. The bottom 60 percent of Ohio taxpayers, making no more than $58,900 a year, get just 13 percent.
The .5 percent of Ohioans who are millionaires win big, with an average tax cut of $99,700, boosting pre-tax income by 4.4 percent and taking nearly half (48.5 percent) of the value of the total statewide tax reduction.
Almost 15 percent of Ohioans could get a tax hike. The reasons are varied and the plan is not finalized, but some factors stand out. For one thing, elimination of the personal exemption will offset an increased standard deduction in families with more than one child. In addition, the plan may eliminate the deduction for state and local taxes, which grows in significance with rising income and home values. The chance of getting a tax hike instead of a tax cut is greatest for upper-middle- and upper-income Ohioans who are not among the richest 1 percent. About 23 percent of Ohio taxpayers in the fourth quintile shown in Table 1 – those making between $58,900 and $96,800 – will get a tax hike, as will 31 percent of those earning between $96,800 and $188,600 and 39 percent of those earning $188,600 to $483,100.
In contrast, just 10.9 percent of the top 1 percent will pay higher taxes, and of those that do, the increase will be miniscule compared to earnings. Other parts of the Republican plan offset the small tax increase this group would face. They will benefit from proposals like the elimination of the estate tax and reduction of the rate on business profits taxed through owners’ personal income tax.
Most taxpayers would see cuts under the Trump/GOP plan, but for all groups below the top 1 percent, they would average 1 percent or less of annual income. The middle 20 percent would get an average cut of $460.
The Republican plan is unbalanced, inequitable and over time, likely to become more so. In the long run, it will increase the deficit and lead to cuts in programs we need – like education, health care, services to boost struggling families, scientific research and more. For most Ohioans, benefits of the Republican tax plan are meager, and the long-term outlook is bleak.