Relief package would cut taxes on average by $3,000: analysis
The coronavirus relief package that President Biden is expected to sign into law in the near future would cut taxes on average by about $3,000 in 2021 and would have the biggest impact on the after-tax incomes of low- and middle-income households, according to an analysis released Monday by the Urban-Brookings Tax Policy Center (TPC).
The analysis focuses on four major tax provisions in the bill: the $1,400 direct payments and the expansions of the child tax credit, earned income tax credit, and child and dependent care tax credit. The Senate passed the bill on Saturday, and final passage in the House is expected this week.
Those with incomes under $25,500 would on average see a 20.1 percent increase in their after-tax incomes for 2021, the biggest percent change of any income group, according to the analysis. Households in the middle of the income distribution, with income between roughly $51,000 and $91,000, would see a 5.5 percent increase in their after-tax income.
Households in the top 1 percent of income — those with income of above roughly $800,000 — would basically see no tax change, the TPC said.
Howard Gleckman, a senior fellow at the TPC, wrote in a blog post on the think tank’s website that Biden’s relief package is very different from former President Trump’s 2017 tax cuts. He said that about three-quarters of the tax benefits in Biden’s bill would go to those making $91,000 or less, while nearly half of the 2017 tax law’s benefits in 2018 went to people in the top 5 percent of income.
“Simply in terms of whose taxes are cut, the bill is in stark contrast to the 2017 Tax Cuts and Jobs Act,” Gleckman wrote.
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