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The Senate Tax Cuts and Jobs Act: The Impacts of Jobs and Incomes by State

2 min readBy: Nicole Kaeding, Morgan Scarboro

With taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. reform in the news and Thursday’s release of the Senate version of the Tax Cuts and Jobs Act, Americans are trying to understand how changes to the tax code will affect their families. The Senate’s plan would grow the economy while simplifying the tax code and reducing marginal rates.

Using the Tax Foundation’s Taxes and Growth (TAG) macroeconomic model, our analysis found that “the plan would significantly lower marginal tax rateThe marginal tax rate is the amount of additional tax paid for every additional dollar earned as income. The average tax rate is the total tax paid divided by total income earned. A 10 percent marginal tax rate means that 10 cents of every next dollar earned would be taken as tax. s and the cost of capital, which would lead to a 3.7 percent increase in GDP over the long term [and] 2.9 percent higher wages.”

The TAG model estimates that the plan would result in the creation of roughly 925,000 new full-time equivalent (FTE) jobs, while increasing the after-tax incomes by 4.4 percent in the long run, meaning families would see an after-tax incomeAfter-tax income is the net amount of income available to invest, save, or consume after federal, state, and withholding taxes have been applied—your disposable income. Companies and, to a lesser extent, individuals, make economic decisions in light of how they can best maximize their earnings. boost of 4.4 percent by the end of the decade. The increase in family incomes is due in part from individual income taxAn individual income tax (or personal income tax) is levied on the wages, salaries, investments, or other forms of income an individual or household earns. The U.S. imposes a progressive income tax where rates increase with income. The Federal Income Tax was established in 1913 with the ratification of the 16th Amendment. Though barely 100 years old, individual income taxes are the largest source of tax revenue in the U.S. reductions and the broader rise in productivity and wages due to economic growth. These estimates take into account all aspects of the Senate version of the Tax Cuts and Jobs Act, including changes to the individual and corporate tax codes.

The table below illustrates the state-by-state impact of the plan for both new jobs and the boost to after-tax incomes for middle-income families.

Source: The above income figures are increases in each state’s median income, using data from the U.S. Census Bureau and our Taxes and Growth Model.
Note: Our analysis includes corrections made to our model in November 2017, to address concerns raised by the Washington Center for Equitable Growth. Therefore, these results are not directly comparable to the House results issued on November 3, 2017.
Estimated FTE Jobs Added Estimated Gain in After-Tax Income for Middle-Income Family
United States Total 925,000 $2,598
Alabama 12,640 $2,078
Alaska 2,126 $3,332
Arizona 17,299 $2,512
Arkansas 7,853 $2,020
California 105,410 $2,932
Colorado 16,622 $3,105
Connecticut 10,742 $3,341
Delaware 2,897 $2,554
District of Columbia 5,004 $3,123
Florida 53,631 $2,252
Georgia 28,007 $2,355
Hawaii 4,143 $3,174
Idaho 4,454 $2,489
Illinois 38,465 $2,701
Indiana 19,721 $2,468
Iowa 10,046 $2,600
Kansas 9,019 $2,500
Kentucky 12,246 $1,996
Louisiana 12,611 $1,857
Maine 3,949 $2,238
Maryland 17,322 $3,245
Massachusetts 22,784 $3,180
Michigan 27,672 $2,512
Minnesota 18,524 $3,090
Mississippi 7,322 $1,808
Missouri 18,183 $2,421
Montana 2,992 $2,511
Nebraska 6,493 $2,612
Nevada 8,316 $2,439
New Hampshire 4,275 $3,355
New Jersey 26,072 $3,013
New Mexico 5,314 $2,132
New York 60,108 $2,703
North Carolina 27,763 $2,366
North Dakota 2,782 $2,648
Ohio 35,063 $2,375
Oklahoma 10,566 $2,241
Oregon 11,724 $2,602
Pennsylvania 37,639 $2,683
Rhode Island 3,135 $2,707
South Carolina 13,139 $2,391
South Dakota 2,768 $2,528
Tennessee 18,973 $2,259
Texas 76,949 $2,558
Utah 9,131 $2,969
Vermont 2,003 $2,677
Virginia 25,062 $2,924
Washington 20,753 $3,094
West Virginia 4,784 $1,952
Wisconsin 18,707 $2,632
Wyoming 1,796 $2,544