The Wall Street Journal’s editors suggest changing the Senate tax bill: The tax credit for children should be shrunk and the top income-tax rate brought down. These changes would, they say, protect people in high-tax states from tax increases (including owners of pass-through businesses). The only drawback to which they point is that “the income distribution tables would look modestly worse,” which doesn’t matter because critics are always going to complain that Republican plans are tilted toward the wealthy.
I think the Journal vastly overestimates the positive effect that cutting the top tax rate would have on economic growth. I don’t think its political case holds up, either.
Most of the complaints about the end of the state and local tax deduction have centered on people in the upper middle class. The Joint Committee on Taxation has produced a, yes, distribution table that shows how many voters in each income category would see tax increases under an earlier version of the Senate tax bill. It showed that the people most likely to take a hit are those making between $100,000 and $500,000 a year.
The Journal’s suggested changes to the bill would hurt almost all of those people to cut taxes for people making more than they do. The Journal wants to give fewer of those households the child tax credit and cut the amount of the credit for those who get it. Meanwhile, it wants the Senate to lower its proposed 38.5 percent tax rate to 35 percent — a change that would help only those singles making more than $500,000 and couples making more than $1 million a year. Those aren’t changes that are going to make the bill more popular, or easier to get into law.