The House Tax Cuts and Jobs Act: The Impacts on Jobs and Incomes by State
November 3, 2017
With yesterday’s release of the House Tax Cuts and Jobs Act, Americans are trying to understand how these tax changes would impact their families. The pro-growth tax plan would simplify the tax code by eliminating most itemized deductions, while reducing marginal tax rates.
Using the Tax Foundation’s Taxes and Growth (TAG) macroeconomic tax model, our analysis found that the “the plan would significantly lower marginal tax rates and the cost of capital, which would lead to 3.9 percent higher GDP over the long term [and] 3.1 percent higher wages.”
Indeed, the TAG model estimates that the plan would result in the creation of roughly 975,000 new full-time equivalent jobs, while increasing after-tax incomes by 4.4 percent in the long run. 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 House 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: Tax Foundation, Taxes and Growth Model, November 2017 version.|
|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.|
|Estimated FTE Jobs Added (10-Year Estimate)||Estimated Gain in After-Tax Income for Middle-Income Family (10-Year Estimate)|
|United States Total||890,000||$2,243|
|District of Columbia||4,815||$2,697|