The GOP’s ‘Doubled Standard Deduction’

by Robert VerBruggen

Over the last couple days, the liberal media ran wild with the idea that the GOP’s tax plan would raise rates for the poor while cutting them for the rich. Outlets such as the The Week and Vox blared this notion from their headlines, relegating to the body of the piece the fact that the plan would also double the standard deduction — an enormous boon to lower-income taxpayers, who seldom itemize. A whole lot of these folks would end up not paying any tax at all.

That’s what I thought, anyway, because that’s what prominent Republicans were saying.

But at Business Insider, drawing on a document newly published by Axios, Josh Barro notes that the GOP’s plan would also wipe out personal exemptions. This cancels out most of the higher standard deduction. Under current law, someone single and childless gets to knock $10,400 off their income before the bottom rate of 10 percent applies; under the GOP plan, they’d knock $12,000 off but see a rate of 12 percent. The low-income would still get a tax cut, but often a tiny one — at least until you factor in some vaguely worded changes to the child tax credit for parents, as well as “additional tax relief” that is not specified at all.

Here’s what this change looks like for those who are single, childless, and making up to $19,725 — where the first bracket ends, after accounting for deductions and exemptions, under current law. It’s a pretty mild cut, especially toward the top of that range. If you make exactly $19,725, you save all of $5.50.

After that point, the current system switches to a rate of 15 percent. The GOP plan would presumably continue its 12 percent rate higher, because it will have just three or four rates to the current system’s seven, but the plan does not include cutoffs.

By contrast, here’s what it would have looked like if Republicans raised the standard deduction to $12,000, changed the bottom rate to 12 percent, and left the rest alone, which is what they’ve been implying:

That’s a . . . slightly different picture.

To be clear, this policy isn’t necessarily bad, and we don’t have all the details yet. I’m a big fan of the child tax credit, for example, and if we can get a bigger boost to that credit by reducing rates less, great.

But Republicans shouldn’t say they’re doubling the standard deduction without mentioning that they’re also killing exemptions, just like the media shouldn’t point out the higher bottom rate without mentioning the higher deduction. Not cool all around.

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