GOP Tax Plan Would Shower Benefits on the Wealthy While Saddling the Nation With Debt

By limiting tax breaks for high-income households and corporations, policymakers could cut the cost of their proposal by more than half while still delivering tax cuts to families earning less than $400,000.

Biden’s Tax Agenda: A Balanced Approach to Cutting Costs and Delivering Benefits

January 17, 2023

President Biden’s tax agenda aims to provide significant benefits to families earning less than $400,000 while minimizing the impact on the federal deficit. This approach contrasts sharply with the massive extension of the Trump-era tax cuts proposed by Congressional Republicans, which would primarily benefit wealthy individuals and businesses.

According to a recent analysis by the Institute on Taxation and Economic Policy (ITEP), extending the 2017 Tax Cuts and Jobs Act (TCJA) would direct more than two-thirds of the benefits to the richest 20 percent of households. A family making $20,000 a year would receive a modest tax cut of a hundred dollars, while a millionaire would receive tens of thousands.

This approach is designed to offer small tax cuts to working families as political cover while delivering massive benefits to the wealthiest Americans — at the cost of a ballooning federal deficit.

The simplest and most equitable way to reduce the deficit impact of the Republican tax plan would be to scale back tax cuts for wealthy individuals and corporations. The Treasury Department recently reported that limiting tax breaks to families earning less than $400,000 would cut the proposal’s cost by more than half.

However, Republican lawmakers have shown little interest in this practical and reasonable approach.

Instead, they have proposed measures such as repealing green manufacturing credits from the Inflation Reduction Act — a move that would offset only a fraction of the cost of their tax cuts for the wealthy and would come at the expense of American manufacturing jobs. Notably, Rep. Marjorie Taylor Greene, a vocal opponent of these credits, celebrated a $2 billion solar plant in her district that was built with the help of these incentives.

If lawmakers really do attempt to offset the huge costs of these tax cuts, they will be forced to turn to spending cuts or tax increases of such magnitude and such regressive impact that they were unimaginable before this Congress.

Republican lawmakers recently prepared a document including additional potential revenue raisers. These proposals range from repealing tax-advantaged private activity bonds, which are often used in the construction of ports and airports, to taxing scholarship tuition of college students.

Most of these proposals would be token gestures, however, raising only tens of billions of dollars and barely making a dent in the $5.5 trillion cost of extending the TCJA.

President-elect Trump has also touted plans to increase tariffs to 20 percent across the board and 60 percent for imports from China. It is impossible to say what any new tariffs would actually look like or how much revenue these will raise as his more recent tariff proposals have varied from full across-the-board 20 percent tariffs on all imported goods to targeted tariffs for territorial expansion. To the extent that tariffs raise revenue, though, they are largely paid for by consumers. This would amount to a tax increase on regular families.

If Republican lawmakers were serious about deficit-neutral tax reform, they would focus on increasing taxes for the ultra-wealthy and large corporations. A recent report from the Congressional Budget Office laid out policy options that – combined with a limited approach to extending the 2017 tax law – could offset much of the revenue loss.

Raising the corporate tax rate by just 1 percent could generate over $100 billion, for example. Taxing U.S. corporations’ foreign income at the domestic rate would yield more than $300 billion. Closing loopholes, such as the Gingrich-Edwards loophole that allows high-income business owners to avoid certain taxes, could raise over $400 billion.

Ultimately, these measures demonstrate that a more equitable and fiscally responsible tax package is possible. The absence of such proposals in the Republican plan reveals their true priority: delivering enormous tax cuts to the wealthiest Americans while average working families receive crumbs.