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Nearly 81 million Americans would pay $0 in federal income tax under the GOP plan

By: Heather Long, The Washington Post
November 9, 2017 Updated: November 9, 2017 at 8:56 am
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WASHINGTON - If the House GOP tax plan becomes law, nearly 81 million Americans - 47.5 percent of all tax filers - would pay nothing in federal income taxes next year, according to a calculation by research firm Evercore ISI. That's an increase of more than 6 million additional tax filers owing nothing in income taxes to the federal government.

As Republicans face heavy criticism that their tax plan favors the rich, some in the GOP have pushed back, arguing that the bill is a boost to working class families since more people will pay $0 in federal taxes.

"You are increasing the number of Americans who pay zero percent in taxes," said Kellyanne Conway, counselor to President Donald Trump, at a news conference Tuesday. "This bill would help moms and dads."

It's a surprising argument from Republicans, who only a few years ago were critical that so many Americans don't pay taxes. In 2012, GOP presidential candidate Mitt Romney said 47 percent of Americans pay no income tax and that most of those people would automatically vote for Barack Obama because "I'll never convince them that they should take personal responsibility and care for their lives."

Romney was correct that 47 percent of tax filers owed nothing in federal income taxes in 2009, a year when many people lost jobs during the height of the Great Recession. Since then, the percentage of Americans paying nothing in income taxes has fallen, in part because millions of people have found work again.

In 2017, 44 percent are on track to pay nothing in income taxes, according to the Tax Policy Center, a nonpartisan research group. Many Americans who pay nothing in income taxes are the working poor who still pay the federal government payroll taxes for Social Security and Medicare, TPC notes. Less than 18 percent of Americans pay neither income nor payroll taxes.

The White House and the House Ways and Means Committee declined to provide an exact number of how many more Americans they expect would pay nothing on their federal taxes under the House bill, so The Washington Post asked tax analysts to calculate it.

If nothing changed in tax policy, 43.9 percent of tax filers (74.7 million filers) would pay zero in taxes in 2018.

If the House GOP plan becomes law, that would rise to 47.5 percent (80.8 million), according to Ernie Tedeschi, a managing director at Evercore ISI and former economist at the Treasury Department under Obama. Tedeschi ran the numbers using the Open Source Policy Center tax model that was created by the American Enterprise Institute, a right-leaning think tank.

The reason the zero club increases is because the House GOP bill expands some deductions and credits that the working poor can take. But a critical savings for the middle class - the Family Flexibility Credit - goes away after 2022. That changes the numbers significantly, Tedeschi found.

In 2027, just 42.2 percent of Americans would pay $0 in taxes, an even lower percentage than what would happen if the bill is not passed. Tedeschi's findings echo those of the Joint Committee on Taxation, Congress's official tax estimators. A JCT report released Tuesday said that nearly 22 percent of Americans would see tax increases by 2023, including 16 percent of families making $20,000 to $30,000 a year and 19 percent of families making $30,000 to $40,000 a year.

"That seems like too high of a failure rate for something that is supposed to be helping middle class," Tedeschi said.

People familiar with the White House and House Republican leaders' thinking on the tax plan, who spoke on the condition of anonymity because of the sensitivity of the negotiations, said Republican lawmakers believe firmly that Congress would extend the Family Flexibility Credit before it is set to expire in five years.

In the past, Congress has almost always extended tax cuts and credits that help the poor and middle class. But that bets on the action of a future Congress. It also means the tax bill would add even more to America's debt than the $1.5 trillion it is currently expected to cost.

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