Repeating and Correcting: Middle Class Gets 23% of Republican Tax Cut

"Middle Class Gets 10% of Republican Tax Cut," published at 5:44 p.m. ET on Monday, incorrectly reported that middle-income households would receive $144 billion in total tax cuts over a decade under the Republican tax plan, or 10% of the total net tax cut. It also incorrectly reported that affluent households making more than $500,000 would receive $171 billion in total tax cuts over a decade. Those calculations were based on an incorrect reading of tables released Monday by the Joint Committee on Taxation. The article also incorrectly reported that households making $500,000 or more comprise 6% of total filers. They comprise 1% of total filers.

A corrected version of the article follows:

Middle-income households will get $61 billion in tax cuts in 2019 under the Republican tax plan poised for passage this week, according to an analysis released late Monday by Congress's Joint Committee on Taxation.

That amounts to 23% of the tax cuts that go directly to individuals. By 2027, however, these households would get a net tax increase, because tax cuts are set to expire under the proposed law.

The calculations are based on JCT estimates of cuts going to households that earn $20,000 to $100,000 a year in wages, dividends and benefits. Those households account for about half of all U.S. tax filers, with nearly a quarter making more and a quarter making less.

The Trump administration has emphasized the benefits of the tax plan for middle-income households.

America's most-affluent households, those earning $500,000 or more a year, which account for 1% of filers, would also get $61 billion in cuts in the first year, according to the JCT analysis. They would get a cut of $12 billion by 2027.

That includes income earned by pass-through businesses such as partnerships and S-corporations that pay taxes on individual returns. It doesn't include the benefits of estate-tax reductions.

Much of the rest would go to businesses in the form of corporate tax cuts, according to the JCT analysis.

The tax plan took another step toward passage Monday, when Maine Republican Sen. Susan Collins, who had been on the fence, said she would support the bill. Mr. Trump plans to sign the bill later this week.

Trump administration officials argue the business tax cuts will help individuals, too, because it will induce companies to hire more and boost workers' wages.

"I don't think it necessarily changes my life one way or another," said Lisa Joles of Concord, Ohio, who runs the heat and air-conditioning repair shop her parents started in the 1970s. Her business brought in about $1.5 million this past year, and she takes home about $50,000 a year. "It could give me or someone else in the middle class that little bit of extra money that they may go out and spend, and it may boost the economy, but I almost feel like that would be a short-term effect."

The muted reaction is consistent with polls showing that the tax cuts aren't very popular. A Quinnipiac University poll released last week found that 55% of those surveyed disapprove of the tax plan, compared with 26% who support it. Republicans were the only group who supported the tax plan, with the support of 66%.

Many households are still weighing how the complicated plan will affect them. The plan recasts many features of the individual tax code -- doubling a child tax credit and the standard deduction for households, while narrowing deductions for state and local taxes, mortgages and the personal exemption. That means it will play out differently for many, depending on factors such as whether they live in high-tax states, have big mortgages or have many children.

Cory Dahl, 59, a pastor who lives in Sturgeon Bay, Wis., said that even though a few extra hundred dollars a year won't make much difference, he is happy to get it. "Five hundred dollars is not a ton of money, but I'd rather have it in my bank account than in my tax payment," he said.

Mr. Dahl has taken the standard deduction in recent years, and he lives in a church-owned home, so he has no mortgage. He thinks raising the standard deduction will help middle-class households like his.

His niece, Katie Dahl, who lives 20 miles away in Baileys Harbor, Wis., is apprehensive. She said her biggest concern is the repeal of the Affordable Care Act requirement that individuals buy health insurance. Both Ms. Dahl, 34, and her husband, Rich Higdon, who is a musician and a potter, rely on the ACA exchange for a heavily subsidized health-insurance plan. They pay $12 a month for a silver-level plan that covers both of them. With an income of about $41,000 a year, Ms. Dahl says the ACA has made them both confident that they could survive as self-employed artists.

"I'm worried what the mandate will do to premiums, and if it will go so far as to start the unraveling of Obamacare, which has been a big boon to us financially," she said.

While the middle class as a whole will see benefits, some people will end up worse off. Using an alternative measure of household income, the Tax Policy Center found that of those households in the very middle of the income distribution, making $48,600 to $86,100 a year, 91.3% would receive a tax cut next year. But 7.3% would receive a tax increase. By 2025, 10.9% would receive a tax increase.

Many taxpayers are worried that they will fall into that latter group. Jon Rose, 45, who runs a car-detailing shop in Carlisle, Pa., could see a cut from his current top tax rate of 25% because he runs an S corporation, a pass-through business that is eligible for a 20% deduction from business income if it meets certain conditions. His accountant told him he would likely save about $3,000 as a result of tax changes. The problem, he said, is that his accountant also said he has about $16,000 worth of personal exemptions that he would no longer be able to claim.

Congress has raised the child-tax credit to $2,000 a child, but he was even dubious about how much that would help him. "I only have two kids, it's not like I have 16," said Mr. Rose, whose wife is a high-school teacher. "It doesn't sound great."

He said that if he somehow ends up saving an extra $500 or even $1,000, that wouldn't mean too much to him. "I wouldn't even notice," he said. "It wouldn't make any difference, especially if it's just coming out gradually over time. If it's $1,000, it's $40 a paycheck. That's dinner."

write to Siobhan Hughes at siobhan.hughes@wsj.com and Shayndi Raice at shayndi.raice@wsj.com

(END) Dow Jones Newswires

December 19, 2017 11:32 ET (16:32 GMT)