Public Radio Admits: Trump Tax Cut Good for Middle & Low Income in California

A story by Southern California Public Radio station KPCC last week appeared to admit that President Donald Trump’s $1.5 billion tax reform is best for middle and lower income households.

During the months leading up to the tax cut, public radio and television railed away that Republican tax reform would be a massive giveaway to the wealthy, paid for by the middle and lower households. KPCC public radio reported polling that only one in three voters supported the bill.

Citing the supposedly non-partisan Congressional Budget Office (CBO), PBS News Hour gravely warned that all taxpayers with annual incomes under $75,000 would become tax losers over the decade long life of tax reform. Individuals with $1 million incomes were predicted to receive an immediate $59,615 a year tax cut windfall, while poor Americans making less than $20,000 per year would suffer losses that would grow from $48 in 2019 to $788 a year by 2027.

But CBO has had dismal track record estimating public spending and government deficits. CBO in 2010 infamously presented a 36-page financial justification to Speaker of the House Nancy Pelosi assuring that Obamacare would reduce federal deficits of $143 billion over the next decade. By 2012, the CBO was estimating that Obamacare’s spiking healthcare insurance premiums would increase the deficit by another $820 billion.

KPCC recently engaged Los Angeles-based H&R Block to break down what the Trump “tax changes have in store for a group of Southern Californians,” ranging from “low-income grad students to highly paid professionals.”

Based on 2016 tax returns, H&R Block found that the impact of tax reform resulted in:

1. LOW INCOME = grad student Christine Vega, earning $23,446, would receive a refund increase of $400;
2. MEDIAN INCOME = Megan and Marlee Malone-Franklin, who together made $69,192 by operating a small business called Hero Birth Services, received a tax cut of $1,497;
3. UPPER INCOME = Rosa Castro earned $140,468 as a board administrator at the Metropolitan Water District and received a tax increase of $4,076; and
4. TOP 1 PPERCENT EARNERS = Mary Ellen and Mark Glackins, making a mid-six figure income as corporate executives, received a tax cut of only $1,919.

The main reason that the upper and highest income households received very small tax cuts in comparison to the lower and median income households is the former’s legal gaming of the tax code by upper income earners, who could take huge amounts of deductions to lower the effective tax they paid drastically.

In 2016, Castro took $57,875 in itemized deductions, and the Glickins took $103,627 in itemized deductions. But deductions for state and local income, sales and property taxes is now capped at $10,000 under the new rules, plus deductions of unreimbursed job expenses were terminated. In 2018, Castro will lose about $22,584 of her federal deductions and the Glickins will lose $59,408 in deductions.

H&R Block’s Aaron Martinez said that although critics claimed that Trump’s tax reform would only benefit the rich: “The new rules don’t always give much back to highly paid workers in a state like California. They pay higher state income taxes than residents in other states, and now their ability to deduct those taxes will be capped.”