Nov. 20, 2017 - Download PDF Version
According to estimates by the Institute on Taxation and Economic Policy, the tax plan reported out of the Senate Finance Committee on November 16 would disproportionately benefit the richest 1 percent of Americans, and would substantially increase the deficit.
The ITEP estimates reveal that nationwide, the richest 1 percent of earners, with an average annual income of more than $2 million, would receive an average tax cut of $37,070 in 2019.
What the ITEP estimates cannot reveal is the lost potential in federal investment represented by this reallocation of resources to the 1 percent. The bill is designed to increase the deficit by no more than $1.5 trillion over ten years – the equivalent of about a year of federal discretionary spending.
The loss of revenue will trigger other choices, as decision makers in Congress either accede to a higher than customary level of national debt, or face political pressures to drastically reduce spending on federal programs and services. Pressure to cut spending could result in losses to popular federal programs ranging from education to health care and infrastructure, and more.
There is little certainty about what programs might be most affected, or how deep the resulting cuts could go, although recent budget proposals provide some likely scenarios. Meanwhile, basic facts remain murky for a public trying to understand what this tax plan means: how much can $1 billion buy?
The Senate bill would bestow an estimated $56.9 billion in tax cuts on the richest 1 percent in 2019. What else could that money buy for residents of each state? We look at what alternative budget choices might be, comparing the aggregate estimated tax cut for the richest 1 percent in each state to alternative budget choices on health care, higher education and infrastructure.
For example: in the United States, the richest one percent – with average incomes of $2 million – will collectively get $56 billion in tax cuts in 2019 under the Senate plan. That money is enough to cover individual health insurance premiums for more than 9.8 million adults. Or, that $56 billion could cover Pell grants for 9.6 million low-income, and often first generation, college students. Or, that same $56 billion could create 539,700 jobs through infrastructure investment.
Senate Tax Cuts for the Richest 1% in 2019: What else could they pay for? |
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| Average Income of Richest 1% | Average Tax Cut for Richest 1% | Cumulative Tax Cut for Richest 1% | Annual Individual Health Insurance Premium* | # Health Insurance Premiums* | # Pell Grants ($5,920 each) | # Infrastructure Jobs | |
| United States | $2,023,900 | $ 37,070 | $56,933,100,000 | $5,760.00 | 9,884,219 | 9,617,078 | 539,727 |
| Alabama | $1,458,500 | $ 40,410 | $953,000,000 | $6,547.92 | 145,542 | 160,980 | 9,034 |
| Alaska | $1,282,900 | $ 55,710 | $198,700,000 | $8,172.00 | 24,315 | 33,564 | 1,884 |
| Arizona | $1,412,300 | $ 38,930 | $1,219,000,000 | $5,649.36 | 215,777 | 205,912 | 11,556 |
| Arkansas | $1,272,000 | $ 29,650 | $425,100,000 | $4,539.00 | 93,655 | 71,807 | 4,030 |
| California | $2,721,500 | $ 1,490 | $258,200,000 | $4,128.00 | 62,548 | 43,615 | 2,448 |
| Colorado | $1,753,900 | $ 45,010 | $1,242,600,000 | $4,956.00 | 250,726 | 209,899 | 11,780 |
| Connecticut | $3,600,500 | $ 30,030 | $527,600,000 | $7,152.00 | 73,770 | 89,122 | 5,002 |
| Delaware | $1,815,800 | $ 30,190 | $149,500,000 | $7,089.36 | 21,088 | 25,253 | 1,417 |
| District of Columbia | $3,261,600 | $ 43,460 | $159,700,000 | $3,888.00 | 41,075 | 26,976 | 1,514 |
| Florida | $3,076,700 | $ 75,240 | $8,147,100,000 | $5,308.92 | 1,534,606 | 1,376,199 | 77,235 |
| Georgia | $2,055,400 | $ 49,150 | $2,313,400,000 | $5,052.72 | 457,852 | 390,777 | 21,931 |
| Hawaii | $1,397,500 | $ 25,350 | $180,200,000 | $5,472.72 | 32,927 | 30,439 | 1,708 |
| Idaho | $1,493,800 | $ 34,120 | $264,800,000 | $5,556.00 | 47,660 | 44,730 | 2,510 |
| Illinois | $2,822,600 | $ 40,220 | $2,350,800,000 | $4,931.28 | 476,712 | 397,095 | 22,286 |
| Indiana | $1,616,600 | $ 38,640 | $1,212,500,000 | $4,397.76 | 275,709 | 204,814 | 11,495 |
| Iowa | $1,223,700 | $ 32,200 | $483,400,000 | $7,872.12 | 61,407 | 81,655 | 4,583 |
| Kansas | $1,815,900 | $ 46,580 | $621,600,000 | $6,846.60 | 90,790 | 105,000 | 5,893 |
| Kentucky | $1,274,800 | $ 28,960 | $597,400,000 | $4,759.80 | 125,509 | 100,912 | 5,663 |
| Louisiana | $1,184,000 | $ 43,150 | $908,900,000 | $5,938.92 | 153,041 | 153,530 | 8,616 |
| Maine | $1,273,100 | $ 25,410 | $175,700,000 | $6,161.40 | 28,516 | 29,679 | 1,666 |
| Maryland | $1,874,700 | $ 35,000 | $1,029,600,000 | $5,472.00 | 188,158 | 173,919 | 9,761 |
| Massachusetts | $3,010,400 | $ 51,210 | $1,789,300,000 | $3,600.00 | 497,028 | 302,247 | 16,963 |
| Michigan | $1,636,000 | $ 46,100 | $2,179,500,000 | $3,983.04 | 547,195 | 368,159 | 20,662 |
| Minnesota | $2,598,200 | $ 27,030 | $727,200,000 | $3,924.00 | 185,321 | 122,838 | 6,894 |
| Mississippi | $1,187,000 | $ 25,200 | $346,300,000 | $6,610.56 | 52,386 | 58,497 | 3,283 |
| Missouri | $1,661,700 | $ 35,230 | $1,040,800,000 | $5,575.08 | 186,688 | 175,811 | 9,867 |
| Montana | $1,661,100 | $ 33,760 | $184,500,000 | $6,041.16 | 30,540 | 31,166 | 1,749 |
| Nebraska | $1,560,400 | $ 39,050 | $350,300,000 | $8,124.12 | 43,119 | 59,172 | 3,321 |
| Nevada | $2,762,400 | $ 79,810 | $1,142,300,000 | $4,606.68 | 247,966 | 192,956 | 10,829 |
| New Hampshire | $1,720,400 | $ 44,200 | $300,700,000 | $5,695.92 | 52,792 | 50,794 | 2,851 |
| New Jersey | $3,207,000 | $ 7,470 | $315,900,000 | $5,016.00 | 62,978 | 53,361 | 2,995 |
| New Mexico | $1,212,700 | $ 28,470 | $257,500,000 | $4,816.32 | 53,464 | 43,497 | 2,441 |
| New York | $3,161,300 | -$2,860 | -$275,400,000 | $6,120.00 | * | * | * |
| North Carolina | $1,674,300 | $ 35,000 | $1,725,700,000 | $8,001.84 | 215,663 | 291,503 | 16,360 |
| North Dakota | $1,397,700 | $ 41,060 | $148,800,000 | $3,575.88 | 41,612 | 25,135 | 1,411 |
| Ohio | $1,602,700 | $ 34,080 | $1,977,100,000 | $4,840.20 | 408,475 | 333,970 | 18,743 |
| Oklahoma | $1,213,900 | $ 38,480 | $652,700,000 | $6,088.44 | 107,203 | 110,253 | 6,188 |
| Oregon | $1,858,200 | $ 23,490 | $503,500,000 | $4,560.00 | 110,417 | 85,051 | 4,773 |
| Pennsylvania | $1,865,300 | $ 42,210 | $2,709,100,000 | $7,626.60 | 355,217 | 457,618 | 25,682 |
| Rhode Island | $1,691,800 | $ 31,110 | $168,400,000 | $3,732.00 | 45,123 | 28,446 | 1,596 |
| South Carolina | $1,190,800 | $ 41,200 | $978,800,000 | $5,990.40 | 163,395 | 165,338 | 9,279 |
| South Dakota | $1,655,200 | $ 63,020 | $285,200,000 | $5,437.80 | 52,448 | 48,176 | 2,704 |
| Tennessee | $1,808,300 | $ 44,940 | $1,430,600,000 | $7,212.72 | 198,344 | 241,655 | 13,562 |
| Texas | $1,832,600 | $ 64,430 | $8,105,800,000 | $4,791.72 | 1,691,626 | 1,369,223 | 76,843 |
| Utah | $1,607,600 | $ 54,980 | $705,500,000 | $6,208.20 | 113,640 | 119,172 | 6,688 |
| Vermont | $1,166,800 | $ 25,920 | $85,300,000 | $6,060.00 | 14,076 | 14,409 | 809 |
| Virginia | $1,699,100 | $ 46,580 | $1,923,700,000 | $5,491.32 | 350,316 | 324,949 | 18,237 |
| Washington | $2,094,000 | $ 71,890 | $2,610,100,000 | $4,068.00 | 641,618 | 440,895 | 24,744 |
| West Virginia | $742,600 | $ 22,950 | $204,200,000 | $6,877.92 | 29,689 | 34,493 | 1,936 |
| Wisconsin | $1,835,200 | $ 39,120 | $1,104,600,000 | $6,812.28 | 162,148 | 186,588 | 10,472 |
| Wyoming | $2,252,400 | $ 78,890 | $219,600,000 | $9,556.80 | 22,978 | 37,095 | 2,082 |
Sources: Institute on Taxation and Economic Policy; Healthcare.gov; Kaiser Family Foundation; Dept. of Education; Feyrer & Sacerdote (Dartmouth/ NBER)
*Note: In New York alone, the richest 1 percent can expect an average tax increase of $2,860 under the Senate plan. We did not calculate the equivalent in health care, Pell grants, or infrastructure jobs.
For the cumulative and average tax cuts to the richest 1 percent in each state, as well as the average income of the richest 1 percent in each state, we relied on estimates for 2019 effects from the Institute on Taxation and Economic Policy Microsimulation Tax Model for the tax bill referred out of Senate committee on November 16, 2017.
For health insurance premium costs in the individual marketplace, we relied primarily on 2018 premium data registered by insurance providers with healthcare.gov. The premium cost for our calculations was the cost of the second-least expensive Silver plan in the most populous county in each state, for a single 40-year-old adult.
Because healthcare.gov data only covers states in the federal marketplace, we also used data from the Kaiser Family Foundation’s 2018 premium calculator for the United States and for states with their own marketplaces (California, Colorado, Connecticut, District of Columbia, Idaho, Maryland, Massachusetts, Minnesota, New York, Rhode Island, Vermont, and Washington). We used the unsubsidized premium for the second-lowest cost Silver plan for a single, 40-year-old nonsmoker in each state’s most populous county.
The maximum Pell grant award for the 2017-2018 school year is $5,920. Our calculations represent the number of maximum awards that could be covered.
The number of infrastructure jobs created by a federal investment depends on many factors: the specific type of infrastructure, the location, the likelihood that the infrastructure would be built without a federal investment, and more.
For the purposes of these calculations, we reviewed various estimates of the cost per infrastructure job created, ranging from roughly $36,000 per job created (Feyrer & Sacerdote, 2011) for investment through the Department of Transportation, to $92,136 per job created by government investment under ARRA (Council of Economic Advisors, 2009), among others.
For these calculations, we use an estimate from Feyrer & Sacerdote (Dartmouth/ NBER, 2011) of $105,485 per job created by federal investments through the Department of Transportation, Department of Energy, and the Environmental Protection Agency. Since the cost per job is high compared to other estimates, our estimates of job creation may be low. Also, in reality job creation costs are likely to vary by state. The Feyrer & Sacerdote approach means the reported job effects represent direct, indirect and induced effects – that is, employment in construction and related industries directly resulting from federal investment, but also the resulting boost to the local economy as the initial investment passes through to existing local businesses and their employees.
