More on why so many parents lose under the TCJA

Ernie Tedeschi writes:

As a followup to my post earlier this morning, I’ve created a table below detailing how each policy in the TCJA affects the number of parental families in 2027 seeing a tax hike.

Using refined policy parameters that have been added to the OSPC model since yesterday, I find that under the TCJA as written, 22 million families with children would see a tax hike in 2027 versus current law. This includes the indirect effects of the corporate income tax cut, but assumes that the filer credits expire in 2023.

That 22 million figure is almost exactly half of the 44 million total families with kids projected for 2027.

I’ve stacked the policies left to right in roughly the same order as in JCT’s score of the TCJA. You can see all the way to the right in bold the 22 million number at the end of the running sum row. So this table is showing how each policy in the TCJA incrementally changes the number of parents who lose out, until we get to the 22 million bottom line.

The story I would tell goes something like this:

1. Right off the bat, 25 million parental families get hit by the new income tax bracket structure.

2. The higher standard deduction and the expansion of personal & child credits are a little more than enough to offset the hit to parental families harmless from the repeal of the personal exemptions: the hike count falls by 2.5 million on net from these three policies combined. If the child tax credit expansion were more generous & refundable, this would be more.

3. Chained CPI adds another million losers, and the miscellaneous limits and repeals of deductions and credits add another 4 million.

4. The corporate tax cuts, AMT repeal, and passthrough rate caps are enough to offset the raw number of losers from #3 above, but their benefits skew more upper income. There are 2.3 million more families making $100K-$200K who get a tax hike from these policies together, for example.