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Social media post misrepresents analysis of Trump tax law
If Your Time is short
• The post distorts the conclusions of an analysis by the Joint Committee on Taxation, which concluded that some income groups will see their after-tax incomes decline in 2021 and beyond.
• Other analyses by independent groups show that every income group will benefit from the law to some degree each year until 2027.
• The difference in the analyses is the complicated way the Joint Committee on Taxation treated the elimination of the penalty for not having health insurance.
A post circulating in liberal corners of social media pushes back against Republicans’ portrayal of President Joe Biden as someone who is going to impose big tax hikes.
"Wait, so Trump passed a bill in 2017 where people who make under $75,000 will have their taxes raised in 2021 and every 2 years after that until 2027 … while the rich get richer … and y’all crying about Biden raising taxes for people who make over 400k. What am I missing....," the post said.
The post was flagged as part of Facebook’s efforts to combat false news and misinformation on its News Feed. (Read more about our partnership with Facebook.)
The assertion about impending tax increases under the 2017 law got a boost on Feb. 1, when the liberal group Occupy Democrats posted it on its Facebook page. There, it got at least 25,000 reactions over the next three days.
When we looked into it, we found that the notion of a continuing series of tax increases buried in the GOP-backed law is misleading. (We inquired with Occupy Democrats, but we did not hear back.)
Generally speaking, analyses of the 2017 law by independent groups have found the opposite of what the post says — that, at least until 2027, when a lot of the tax cuts will have expired, all income groups will see a reduction in taxes (or an increase in after-tax income).
In their "distributional tables" — the analytical charts that show how much a typical taxpayer in a given income group will see their after-tax income rise or fall under the law — both the Urban Institute-Brookings Institution Tax Policy Center and the Tax Foundation concluded that until 2027, taxpayers across the income spectrum will fare better under the 2017 law than they would have otherwise. Some income groups will save more money than others do, and results for individual taxpayers will vary depending on the nature of their income; these tables are based on averages.
However, there’s one analysis, from Congress’ Joint Committee on Taxation, that doesn’t show this pattern, and it’s the one that the post relies on.
The discrepancy stems from a difference in the assumptions that went into each analysis. Unlike other analyses, the Joint Committee’s factored in the law’s provision eliminating the tax penalty for not having health insurance, and it did so in a counterintuitive way.
Under the committee’s longstanding principles, it treats the elimination of this penalty as a net tax increase — not a net decrease.
Why? The logic is that in the absence of a mandate to have health insurance, more people would forgo buying it on the marketplaces established under the Affordable Care Act. As a result, fewer people would get the tax subsidies that come with buying insurance on the marketplaces. These subsidies are meant to help people afford their insurance premiums.
The practical effect of this analytical approach is that, in the distributional tables, some lower- and moderate-income groups see their income gains from the 2017 tax law disappear — a sharp contrast from what the Tax Policy Center and Tax Foundation concluded.
As an example, here’s the Joint Committee on Taxation’s table that compares the tax burdens in 2023, both before and after the law’s passage:
The chart shows that while most income groups will see a tax cut in 2023 as a result of the law, both the collective tax burden and the average tax rate for households earning up to $30,000 are set to rise.
The same pattern holds in 2025, extending that year to taxpayers earning up to $40,000. And in 2027, after a host of tax cuts in the bill expire, the range of taxpayers expands to those earning as much as $75,000.
Tax experts say that the approach of the Tax Policy Center and the Tax Foundation — which doesn’t factor in the change in the health insurance penalty — is a more accurate reading of the tax rates set down in the 2017 law.
The decision process that leads to fewer tax subsidies does not amount to having "their taxes raised," as the Facebook post said.
"While it is important to consider the impact of the (tax law) on premium tax credits and health insurance take-up, it is misleading to call this effect a ‘stealth tax increase,’" wrote Garrett Watson in a post for the Tax Foundation, where he is a senior tax policy analyst. "The decline in premium tax credits has nothing to do with a change in tax rates or the generosity of the credits as established under the (Affordable Care Act), but rather due to voluntary decisions individuals make about whether to purchase qualified health insurance."
The post said, "Trump passed a bill in 2017 where people who make under $75,000 will have their taxes raised in 2021 and every 2 years after that until 2027."
Tables produced by the Joint Committee on Taxation do suggest that after-tax incomes for some income groups will decline, but it’s misleading to say that this amounts to having "their taxes raised."
These tax increases show up in the tables because the committee concluded that eliminating the individual health insurance mandate would lead people to forgo buying insurance, and would in turn reduce the tax subsidies they would’ve received to help them pay their premiums.
By contrast, at least two other independent groups ignored the impact of this provision in their analyses and concluded that every income group will benefit from the tax law to some degree each year until 2027.
We rate it Mostly False.
Facebook post, Feb. 1, 2021
Joint Committee on Taxation, "Distributional Effects Of The Conference Agreement For H.R.1, The Tax Cuts And Jobs Act," Dec. 18, 2017
Tax Foundation, "No ‘Stealth Tax Hike’ in 2021, but Individual and Business Tax Increases Loom," Nov. 18, 2020
Tax Foundation, "The Distributional Impact of the Tax Cuts and Jobs Act over the Next Decade," June 28, 2018
Urban Institute-Brookings Institution Tax Policy Center, "Distributional Analysis of the Conference Agreement for the Tax Cuts and Jobs Act," Dec. 18, 2017
Email interview with Garrett Watson, senior tax policy analyst at the Tax Foundation, Feb. 3, 2021
Email interview with Kyle Pomerleau, resident fellow at the American Enterprise Institute, Feb. 3, 2021
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Social media post misrepresents analysis of Trump tax law
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