This month, the government will take $1.5 TRILLION in tax revenue and distribute it to the American people – it sounds great. Trump even referred to it on Nov 2nd, 2017 as “a Big Beautiful Christmas Present” for Americans. A few calculations can help us understand just how great this present is.
First, what would have happened if all Americans (325 million people) would have received an equal share of Trump’s 1.5 Trillion dollar present?
When comparing 2018 taxes to 2017 taxes, every American would have seen a federal tax reduction of about $4,615 per person. Simply said, if your income has not changed, and you paid a total of $20,000 in federal taxes in 2017, you could have expected to see your total federal tax reduced to $15,385 in 2018. If you are the head of household and have a spouse and 2 children, your federal taxes would almost disappear; your tax bill would be $1,540 instead of $20,000.
Unfortunately, it doesn’t work like that. Most of Trump’s Big Beautiful Christmas Present is a gift to American companies and corporations and they get the lion’s share of the $1.5 Trillion. The next largest part of the money goes to the already rich. The greatest tax savings will go to those who are making over $1 Million per year, but those who make $100,000 per year will also see some increased savings.
70% of the $1.5 Trillion is allocated to companies and the approximately 7% of Americans making over $100,000 per year. This leaves $0.45 Trillion for the remaining 93% of Americans. Now, the average benefit to everyone who makes less than $100,000 per year looks like this:
When comparing 2018 taxes to 2017 taxes, every American making less than $100,000 per year would see a federal tax reduction of about $1,489 per person if the tax savings would be distributed evenly across the entire population. Following the same assumptions as earlier, if you paid $20,000 in federal taxes in 2017, you should now see your total federal tax reduced to $18,511. If you are the head of household and have a spouse and 2 children, your federal taxes would reduce to $14,044.
But wait, there’s more to it; the tax bill is complicated and its benefits are not distributed evenly across the entire population. The tax bill offers some real (but relatively small) benefits to people making less than $100,000 per year, but it also eliminates a lot of deductions. In short, Trump’s Christmas present gives you a bit more money in one pocket, but takes money from your other pocket. For example, you may see reduced taxes, but much higher health care costs.
At the end, if you are making less than $100,000 per year, Trump’s Big Beautiful Christmas Present will turn out to be almost a wash. A couple of hundred dollars more or less will not change your life.
If you are making over $100,000, and especially, if you are making over $1 million, or if you are a stakeholder in a company, pull out the champagne glasses and celebrate – Trump’s Big Beautiful Christmas present is for you!
Sources
6.03% of Americans over 18 had incomes of $100,000 or more in 2010
https://www.cnbc.com/id/47921282
Trump's Christmas Present 