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Republicans are united in their opposition to a federal budget reconciliation bill that U.S. Senate Democrats hope to pass by next month as part of President Joe Biden’s economic agenda.
The Build Back Better Act was proposed as $3.5 trillion legislative package that included $1.3 trillion in tax breaks and about $2.3 trillion in revenue increases to finance free universal preschool, free community college, lower prescription drug costs and other priorities over the next 10 years.
But it has been subject to a flurry of negotiations in recent days over its scope and cost, with Biden acknowledging that entire sections like free community college tuition would be removed and congressional Democrats considering a tax on billionaires instead of higher income and corporate tax rates.
So it’s not clear yet what will be in or out of the final bill. On Sept. 27, while commenting on the original Build Back Better Act, GOP U.S. Sen. Chuck Grassley of Iowa tweeted the following (which has been edited for clarity):
“Democrats pledge not to raise ‘1 penny’ of taxes on people earning under $400,000. Don’t believe it. Non-partisan Joint Tax committee analysis shows no income group is safe from Democrats’ reckless tax hikes. Over 12 percent of taxpayers with incomes $50,000-$100,000 would see (a) tax hike and 35 percent of taxpayers with incomes of $100,000-$200,000.”
Last month, the U.S. House Ways and Means Committee released draft legislation of the budget reconciliation bill that includes proposed tax breaks for lower income families and businesses, as well as tax increases to finance the projected $943 billion cost of the bill’s spending measures.
It should be noted claims similar to those cited by Grassley in his tweet have also been made by other ranking GOP officials as they push back on Democrats’ efforts to pass this legislation in recent months.
The first part of Grassley’s statement refers to the proposed increase in the top tax rate, which would rise to 39.6 percent for individuals earning more than $400,000 or for joint filers earning more than $450,000.
In response to the Fact Checker’s request for sourcing, Grassley’s office pointed to figures published in a Sept. 22 report by the Congressional Joint Committee on Taxation, a legislative committee that calculates revenue estimates for tax legislation considered by Congress. Grassley is a member.
For that 35 percent statistic, Grassley’s office pointed to section of the report that estimates the percentage of taxpayers by income category who would see a tax increase or decrease in calendar year 2023.
Of those who make $100,000 to $200,000 a year, 24.1 percent were expected to see a tax increase of between $100 and $500 and 10.7 percent could see an increase greater than $500. Added together, that comes to 34.8 percent.
There’s a bit more math involved with that 12 percent figure cited by Grassley. In an email to the Fact Checker, the senator’s team said that computation used figures from an April 15 report by the Joint Committee on Taxation.
According to the report, 45.867 million taxpayers fall in an income bracket between $50,000 and $100,000 (that includes 28.1 million making $50,000 to $75,000 and 17.767 million making $75,000 to $100,000).
Using the Sept. 22 committee findings, it can be determined that 5.653 million taxpayers with incomes between $50,000 and $100,000 would see a tax increase of $100 or more. That number divided by the total number of tax filers in that income range — 45.867 million — comes to 12.3 percent.
That math is sound and both figures cited in Grassley’s tweet check out.
On the other hand, the September report from the Joint Committee finds 29.7 percent of individuals under the $100,000 to $200,000 tax bracket would see a decrease in their taxes for 2023. In addition, tax decreases would be felt by 24.4 percent of those making $50,000 to $75,000 and 24.7 percent of those making $75,000 to $100,000.
Nearly 17 percent of taxpayers in all tax brackets would pay more in 2023, including some who earn less than $400,000, according to an Associated Press analysis of a Joint Committee report published Sept. 14.
However, it’s also expected 40 to 60 percent of taxpayers would see an average tax cut of about $630, according to the Tax Policy Center, a nonpartisan think tank.
It is fair to say Americans making less than $400,000 could see higher taxes under the original plan, though that increase is small.
In that Joint Committee report cited by Grassley, data shows tax increases also would be imposed on a small percentage of those making $50,000 or less a year. For example, the largest proposed tax cut is a 65.7 percent decline for Americans making between $10,000 to $20,000 a year.
If the bottom 80 percent of income earners do experience a tax increase, they would see a 0.2 to 0.6 percent drop in after-tax income, according to the Committee for a Responsible Federal Budget, a right-of-center nonprofit advocacy organization. For a typical middle class family, the analysis stated that amounts to between $180 to $260 a year.
What Grassley’s tweet fails to mention is that a number of analyses conducted by tax policy groups have found most of the burden proposed under the tax plan falls on those earning the highest income.
According to the Committee for a Responsible Federal Budget, 80 to 90 percent of the tax hikes would affect the top 5 percent of income earners.
Households that fall under that top 1 percent of income earners in 2021 would face a nearly 18 percent reduction in after-tax income, or income after all taxes have been deducted. That amounts to an average tax increase of more than $100,000, according to the American Enterprise Institute.
The senator from Iowa is correct some Americans making less than $400,000 would see tax increases, and has the data to support his specific claims about the percentage of those under specific income categories who would see a tax hike. Analyses of the tax proposal have shown these increases most likely will be very slight for the average income earner, however, and would mostly be felt by the wealthiest Americans. Further, a greater percentage of individuals under those income brackets would actually see an tax cut.
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Members of the Fact Checker team are Erin Jordan, Michaela Ramm and Marissa Payne. This Fact Checker was researched and written by Michaela Ramm of The Gazette.