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GOP tax plan favors the richest, analysis shows

  • The new GOP tax framework would spread tax cuts across all income groups, with the richest Americans seeing the biggest windfall.
  • And, if enacted, the package would blow a $2.4 trillion hole in the federal budget.
  • That's the finding of an analysis by the Tax Policy Center, which crunched the numbers to come up with a preliminary estimate of the plan's costs and beneficiaries.

The GOP tax framework unveiled this week would spread tax cuts across all income groups, with the richest Americans seeing the biggest windfall.

And, if enacted, the package would blow a $2.4 trillion hole in the federal budget.

That's the finding of an analysis by the Tax Policy Center, which crunched the numbers to come up with a preliminary estimate of the plan's costs and beneficiaries.

The biggest winner would be the richest 1 percent of U.S. taxpayers, who would get more than half of the benefits of the plan, according to the center.

President Donald Trump praised the plan Friday as a "giant, beautiful, massive, the biggest ever in our country, tax cut." He said it would help American businesses and workers "thrive, compete and grow."

But the analysis released Friday found that, over time, the plan would increase the tax burden on about 28 percent of the middle-class workers Trump has pledged to help.

"Someone needs to honestly explain to working-class households why they'd want to get anywhere near this thing," said Jared Bernstein, a former chief economist to Vice President Joe Biden.

Much about the proposed tax plan has yet to be finalized, including the income cutoffs for three new tax brackets that will replace the current seven marginal rates. The nine-page "framework" released Wednesday also calls for eliminating many popular tax deductions, but it stopped short of spelling out exactly which ones would be repealed.

As a result, the Tax Policy Center analysis made a series of assumptions about the impact of the provisions that have not been spelled out. The analysis also did not take into account any future economic impact, a process known as "dynamic scoring," that GOP proponents say will generate higher revenues and reduce the impact on the federal deficit.

Based on the available details, the center estimates that the top 1 percent of households, or those making more than $730,000, will get an 8.5 percent tax windfall — or about half of the total cuts provided by the plan.

Much of the benefits would fall to businesses. Corporations would see some $2.6 trillion in tax savings over a decade while individual taxpayers would get $470 billion.

But the worst news for middle-class taxpayers is that they would see a tax increase over 10 years, according to the analysis.

That includes some 10 percent of low-income households — more than a quarter of the middle class.

And people making $150,000 to $300,000 a year would also get hit. By 2027, 60 percent of them would see their taxes rise by about $4,000, according to the tax center. But just 3 percent of the richest Americans would face a tax increase, the analysis found.

The increase would result from several proposed provisions. One would replace the personal exemption available to households with a bigger standard deduction. For larger households, the tradeoff might leave them worse off.

The tax plan also relies on tax credits that are not indexed to inflation, which means the benefit of those credits diminishes over time.

The framework also indexes the tax brackets themselves to a measure of inflation that tax policy center says grows more slowly than the widely used Consumer Price Index. That means the individual would move to a higher bracket more quickly than with the more conventional inflation measure.

Taken together, the center estimates that the proposal would cost the Treasury roughly by $2.4 trillion over the first 10 years and $3.2 trillion over the following decade.

Business income tax provisions alone would cut revenues by $2.6 trillion over the first 10 years. Those would be offset by changes in the rules for individual income that would raise revenues by about $470 billion over the same period.

CNBC's Ylan Mui contributed to this report.

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