Top earners to receive lion’s share of income boost from GOP bill: CBO

The top tenth of the U.S. income spectrum is set to receive the biggest annual boost to their wealth as a result of the House-passed Republican tax-and-spending cut bill, according to a new analysis from the Congressional Budget Office (CBO), while the bottom three tenths are set to lose wealth and the fourth will break even.

CBO’s distributional analysis of House-passed tax perks released Thursday sweeps dramatically upward, showing that the wealth benefits of the bill increase as you move up the income scale.

Households making up to $107,000 a year will get an average of $1,200 in tax benefits a year through 2034. Those making up to $138,000 will get $1,750 a year; those making up to $178,000 will get $2,400 a year; those making up to $242,000 will get $3,650 a year, and households in the top tenth, making up to $682,000 a year, will get $13,500 in average annual tax benefits.

The average annual tax perks for the top tenth, or decile, of earners are larger than the tax perks for the rest of the income spectrum combined, which sum to about $10,800 per year, compared to the $13,500 for the top slice.

Income in the U.S. is not distributed evenly, so while there are about 33 million people in each decile, most Americans make something closer to the median national income around $80,000 a year.

Tax perks for that group are about $850 a year, though they’ll lose the equivalent of about half of that in transfer reductions for social programs. Tax perks in the House-passed bill are offset through the income spectrum by a reduction to federal and in-state transfers..

The net effect of those reductions means people in the bottom three tenths will be financially worse off than they were while people in the fourth income decile will roughly break even.

Previous analyses by CBO and other budget modelers have also shown that the House bill would transfer resources from lower deciles to upper ones, effectively taking from the poor to give to the rich.

The distributional effects of the bill — which still has to make it through the Senate, where it could undergo significant changes — are likely to add to longer term trends of wealth inequality in the U.S., which has skyrocketed since around 1980.

The top decile of the U.S. income spectrum made between 45 and 50 percent of the total income in the U.S. in 2010, and the top 1 percent made 20 percent of all the income, according to data compiled by economist Thomas Piketty. That includes both salaries and income from capital.

While those shares dipped between 1940 and 1980, they’re now back to levels not seen since the 1920s.

Historical trends also suggest that any economic growth coming from the legislation – which is expected to be minimal at around 0.03 percent, according to the Joint Committee on Taxation – will also be enjoyed primarily by top earners.

“If we consider the total growth of the U.S. economy in the thirty years prior to the [2007 to 2008] crisis, that is, from 1977 to 2007, we find that the richest ten percent appropriated three-quarters of the growth,” Piketty wrote in 2013.

The House-passed GOP legislation includes some specific tax breaks geared toward working class Americans, such as canceling taxes on tips and overtime pay and boosting credits for seniors along with the standard deduction. Most of them expire at the end of 2028.

In a separate analysis put out Thursday, CBO found those cuts would increase deficits by $1.4 trillion over the next nine years. If they were kept permanent, they would add $4.5 trillion to the deficit.