There have been a raft of studies recently isolating the effect of certain elements of the House GOP tax reform “Blueprint” on various industries and even the 50 states. While it is understandable that interest groups whose business models are tied to a particular provision of the 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. code would wish to draw attention to how a specific element of the Blueprint would impact them, it is also important for lawmakers who are subject to a heavy dose of lobbying to recognize that the Blueprint is a comprehensive tax reform plan, so it is important to focus on the total effects of the plan on the economy and families.
Using the Tax Foundation’s Taxes and Growth (TAG) macroeconomic tax model, our analysis found that the “plan would significantly reduce the cost of capital and reduce the 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. on labor. These changes in the incentives to work and invest would greatly increase the U.S. economy’s size in the long run, boost wages, and result in more full-time equivalent jobs.”
Indeed, the TAG model estimates that the plan would result in the creation of roughly 1.7 million new full-time equivalent jobs, while increasing the 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 after-tax income. s of median households by 8.7 percent. The increase in family incomes is the result of both the income tax cuts and the broader rise in productivity and wages due to economic growth. These estimates take into account all aspects of the Blueprint, including the impact of the border adjustment.
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.
|Note: The results here use Census figures to illustrate the income gains for median households by state. These estimates will differ slightly from our previous estimates using aggregate IRS figures to illustrate the income gains for taxpayers at various income levels.
Source: Tax Foundation TAG Model, U.S. Census
|Estimated FTE Jobs Added||Estimated Gain in After Tax Income for Median Households|