Dynamic Distributional Impact Shows the TCJA Lifts After-Tax Incomes Across Income Groups

A recent Tax Foundation report analyzed the distributional impact of the Tax Cuts and Jobs Act (TCJA) on both a conventional and dynamic basis, and found it will lead to higher after-tax incomes over the 2018-2027 decade for all income groups. This is because of lower tax liabilities, on average, for all taxpayers, while the individual income tax cuts are in effect, and higher economic growth generated by the law. Lower tax rates across brackets, an expanded standard deduction, and other changes to the individual income tax will be in effect through 2025, leading to increases in after-tax income in these years. This effect is immediate: for example, in 2018, after-tax incomes will be, on average, 2.6 percent higher on a dynamic basis. Specifically, in 2018, the bottom quintile will see after-tax incomes increase by 1.1 percent, the middle quintile by 1.9 percent, and the top one percent will see incomes increase by 4.1 percent. Other provisions in the TCJA are projected to…

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