FACT CHECK: Would ‘No’ Lower Or Middle Class Families Do Better Under The GOP Tax Plan?

Kush Desai | Fact Check Reporter

House Minority Leader Nancy Pelosi claimed “no” lower- or middle-class families would benefit from the House Republicans’ tax bill Sunday on CNN’s “State Of The Union.” 

Verdict: False

Most taxpayers, including many in the lower and middle classes, are projected to benefit from tax cuts in both the short and long run under the House Republicans’ Tax Cuts And Jobs Act.

Fact Check:

Democratic Party leaders have come out against the House Republicans’ tax reform bill on the grounds that it benefits the wealthy at the expense of lower- and middle-class Americans. Pelosi levied an even stronger charge against the bill Sunday when “State Of The Union” host Jake Tapper asked her, “Is it not true that some lower- and middle-class families will do better under the plan?”

In response, Pelosi claimed, “No. No, they won’t.”

The San Francisco representative’s claim contradicts what multiple analyses of the tax bill suggest.

The Tax Foundation, a nonpartisan think tank, estimates that taxpayers in every single income group would get a tax cut under the House bill in 2018, with lower- and middle-class Americans in the bottom 80 percent of incomes experiencing an estimated .8 to 2.4 percent bump in their after-tax incomes.

The Tax Policy Center (TPC), another nonpartisan think tank, estimates that a 76 percent majority of taxpayers would receive a tax cut under the bill in 2018. These beneficiaries include 47 percent of taxpayers in the lowest 20 percent of incomes, 84 percent of taxpayers in the bottom 20 to 40 percent of incomes, and over 89 percent of taxpayers in the middle 40 to 60 percent of incomes.

To be clear, taxpayers would derive some of these benefits from provisions in the bill that expire or change by 2027. These provisions include certain temporary tax credits and a lack of inflation indexing.

But even then, most taxpayers still stand to gain under the bill when these provisions expire or change by 2027, including many lower- and middle-class Americans.

Fifty-nine percent of taxpayers would still see a tax cut in 2027 under the bill over current law, TPC estimates. This includes 41 percent of taxpayers in the lowest 20 percent of incomes, 62 percent of taxpayers in the bottom 20 to 40 percent of incomes, and over two-thirds of taxpayers in the middle 40 to 60 percent of incomes.

The Tax Foundation similarly estimates that taxpayers in every income quintile would experience gains in their after-tax income in 2027 under the bill over current law.

Pelosi’s office did not respond to The Daily Caller News Foundation’s request for comment. She backed up her “no” claim in the CNN segment by explaining how House Republicans “give with one hand and take away with the other” in the bill and how they only “throw a few crumbs to the middle class.” She went on to discuss the bill’s scrapping of deductions like the one for state and local income and sales taxes (SALT) and some impacts of the bill that are unrelated to taxation rates.

Nevertheless, less than a third of taxpayers itemize their deductions, and these taxpayers are disproportionately from the upper class. The GOP bill would double the preset, standard deduction that the other two-thirds of (mostly lower- and middle-class) taxpayers instead opt to take.

And while the Tax Foundation and TPC‘s analyses both indicate that the wealthy disproportionately benefit from the tax bill, lower- and middle-class Americans may benefit more from the bill’s broader effects on the economy.

The tax bill could result in economic benefits – including increased long-run Gross Domestic Product (GDP), wage rate growth and new job creation – that would translate into larger proportional gains in after-tax income for the bottom 80 percent of Americans than they would for the top 20 percent, the Tax Foundation estimates.

Pelosi’s claim that “no” lower- or middle-class families will benefit from the Republicans’ Tax Cuts And Job Act does not hold up to the facts.

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Kush Desai

Fact Check Reporter