![]() ![]() A 20 percent deduction for pass-through income.One-third of the benefits from cutting corporate rates ultimately flow to the top 1 percent, TPC estimates - assuming that the cost of those tax cuts are ultimately paid for, but without incorporating estimates of who ends up paying. These tax cuts overwhelmingly benefit wealthy shareholders and highly paid executives. The 2017 tax law cuts the corporate tax rate from 35 to 21 percent and shifts toward a territorial tax system, in which multinational corporations’ foreign profits largely no longer face U.S. The law’s tilt to the top reflects several large provisions that primarily benefit the most well-off: So, while the highest-income white households make up just 0.8 percent of all households, they receive 23.7 percent of the total tax cuts from the 2017 tax law, far more than the 13.8 percent that the bottom 60 percent of households of all races receives, the Institute for Taxation and Economic Policy estimates. White families are three times more likely than Latino and Black families to be among the highest-income 1 percent of households. Decades of policy choices put barriers to economic success in front of households of color, resulting in those households being overrepresented on the bottom rungs of the income ladder, while white households are overrepresented at the top. The tax law’s tilt to the most well-off exacerbates racial inequities. (See Figure 1.) The top 1 percent will already have after-tax incomes averaging $2.1 million that year, while the average incomes of the bottom 60 percent will be just $41,800. The tax cuts that year will average $61,100 for top 1 percent - and $252,300 for the top one-tenth of 1 percent. Instead of focusing on the challenges of low- and moderate-income people, the 2017 tax law will boost the after-tax incomes of households in the top 1 percent by 2.9 percent by 2025, roughly three times the 1.0 percent gain for households in the bottom 60 percent, the Tax Policy Center (TPC) estimates. It ignores the stagnation of working-class wages and exacerbates inequality. The 2017 Tax Law’s Three Fundamental Flaws Mean It Requires Fundamental Restructuringġ. Finally, I explain how a restructuring of the law can fix these flaws. I will then explain in more detail how the 2017 tax law largely left behind low- and moderate-income Americans - and in many ways hurts them. I will first outline the fundamental flaws of the 2017 tax law: 1) it ignores the stagnation of working-class wages and exacerbates inequality 2) it weakens revenues when the nation needs to raise more and 3) it encourages rampant tax avoidance and gaming that will undermine the integrity of tax code. Chairman Yarmuth, Ranking Member Womack, and distinguished members of the Committee, thank you for the opportunity to testify. ![]()
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