The big push of the week appears to be that the Republicans have in mind a “middle class tax cut.” Notice please that we’re not getting all that much in the way of “tax reform” but we are poised to get a deficit financed tax cut. And, that WE part doesn’t actually include all that many people who file tax returns from Nevada.
Nevada by the Numbers: 2,940,058 Nevadans filed tax returns in 2015 (the last year for which statistics are available from the IRS.) 655,530 were individual tax returns and 440,130 were filed as joint returns. There were 233,730 filed as Head of Household. 713,530 filers used paid preparers. The number in that last category ranges from those who have extremely complicated filings to those of us who simply find it convenient to have someone else fill in the forms, or those who take advantage of tax prep companies who offer free filing services to those who don’t actually owe taxes or have small refunds due from the taxes they’ve already paid.
When we look at the adjusted gross incomes reported by Nevadans it may be useful to put the numbers in some context. For example, the median income in Nevada is $51,847 and the per capita income is $26,541. The median value of a housing unit owned by the occupant is $173,700 and the median selected mortgage cost is $1,442 per month. The median gross rent is reported as $973.00. This gives us a preliminary picture of the 1,016,709 households in Nevada, and our population of 2,940,058.
1,350,730 Nevadans filed income tax returns in 2015. 27.21% of the Nevada filers reported adjusted gross income between $25,000 and $50,000. 13.5% of filers reported AGI between $50,000 and $75,000. 8.15% reported AGI between $75,000 and $100,000. Another 10.22% reported an AGI between $100,000 and $200,000. From this point on the percentage of filers by category drops, those reporting AGI between $200,000 and $500,000 were 2.48% of the filers; those reporting AGI between $500,000 and $1 million were 0.43%, and those reporting over $1 million AGI made up 0.26%.
The current (2017) tax brackets and explanations can be found compliments of the Tax Foundation in a convenient table form for single and joint filers. To make a long story a bit shorter, a person would have to have an AGI (adjusted gross income) of at least $191,650 if filing a single return to hit the 33% bracket, and $233,350 if filing a joint return.
The numbers indicate that 48.95% of those filing Federal income tax returns from Nevada are reporting below $100,000 in annual adjusted gross income. Some of the 138,000 Nevada filings between $100,000 and $200,000 AGI may have been included in the bracket in which there is a $18,735.75 liability plus 28% of an excess over $91,900. Fewer still would be in the 33% bracket with a liability of $46,643.75 plus 33% over $191,650. Indeed, only 3.17% of Nevada returns reported AGI over $200,000 annually (35% and 39.6% brackets.)
Where’s the middle? Numbers are objective and instructive, but tax policy can get pretty emotional. By the numbers a person earning about $52,000 per year in this state is in the “middle.” Pew Research provides one of the more commonly accepted definitions of Middle Class, “2/3rds to 2 times the national median income for household size.” In current parlance this would be in a range of $46,960 to $140,900. If we compare this to the Nevadans filing tax returns in 2015 then 21.74% are in the $50,000 to $100,000 AGI range; some others will be in the $100,000 to $200,000 AGI range (10.22%.) Undifferentiated reporting with two sets of categorization make this a difficult call without being able to drill down into that latter classification of filers) However, what these numbers do tell us is that to be considered a Middle Class Tax Cut the benefits should accrue to those earning between $46,960 (a little below the Nevada median earnings) and $140,900.
So, how does the current edition of the Republican tax plan fit into “the Middle.”
“Despite repeated promises from Republican lawmakers that the plan is designed to provide relief to the middle class, nearly 30 percent of taxpayers with incomes between $50,000 and $150,000 would see a tax increase, according to the study by the Urban-Brookings Tax Policy Center. The majority of households that made between $150,000 and $300,000 would see a tax increase.” [WaPo]
The report from which the Washington Post article is derived is more specific.
“In 2018, the average tax bill for all income groups would decline. Taxpayers in the bottom 95 percent of the income distribution would see average after-tax incomes increase between 0.5 and 1.2 percent. Taxpayers in the top 1 percent (incomes above $730,000), would receive about 50 percent of the total tax benefit; their after-tax income would increase an average of 8.5 percent. Between 2018 and 2027, the average tax cut as a share of after-tax income would fall for all income groups other than the top 1 percent. In 2027, taxpayers between the 80th and 95th percentiles of income (between about $150,000 and $300,000) would experience a slight tax increase on average.”
There’s something about an analysis from the Tax Foundation reporting that 50% of the total tax benefit going to the top 1% that doesn’t sound precisely like a “middle class tax break.” In short, the analysis makes it seem much more likely that the plan would be far more beneficial for the Nevada income earners who report AGIs over $500,000 per year, a total of 9,290 filers out of 1,350,730 who filed tax returns. This really isn’t a “middle class tax cut.” At least not in terms of the real Nevadans, who report their real incomes.