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How the Republican tax law hurts the poor and helps the rich, in one chart

Oof.

Dylan Matthews is a senior correspondent and head writer for Vox's Future Perfect section and has worked at Vox since 2014. He is particularly interested in global health and pandemic prevention, anti-poverty efforts, economic policy and theory, and conflicts about the right way to do philanthropy.

Here, in one chart, is how Americans of different incomes will be helped or hurt by the Tax Cuts and Jobs Act of 2017, the Republican tax cuts/tax reform bill signed into law by President Donald Trump late last year:

Effects on after-tax income of the Tax Cuts and Jobs Act Washington Center for Equitable Growth/Greg Leiserson

Made by Washington Center for Equitable Growth economist Greg Leiserson, the chart shows the law’s effects in 2025, when the cuts in the law are still being implemented and haven’t expired. The richest Americans, those in the 95th percentile or above (meaning they earn $308,900 or more come the year 2025) do very well, seeing a boost of more than 3 percent to their after-tax incomes. That’s primarily a result of reductions in their individual income tax rates and a big cut to taxes on corporations, which are disproportionately owned by wealthy individuals.

But the very poorest Americans see a fall in their after-tax income that is almost as large. That is almost entirely the result of the law’s repeal of the Affordable Care Act’s individual mandate. The Congressional Budget Office has estimated that repealing the mandate will lead to 13 million fewer people having insurance over the course of a decade, with much of that reduction coming among the poorest Americans eligible for Medicaid. Fewer people signed up for Medicaid and subsidized Obamacare coverage means lower effective incomes for poor Americans.

Defenders of the law will likely retort that people not enrolling in coverage due to the mandate’s repeal a) are exercising a free choice, and that it is thus unfair to treat their loss of valuable health benefits as an effect of government policy rather than their own choices and b) that the CBO overestimates how important the mandate is, and that millions more people will stay enrolled in Medicaid and not see a loss of income.

But the CBO estimates are nonetheless the most rigorous available to us, and even “voluntary” reductions in insurance can lead to worse health, more financial hardship, and even early death. Moreover, some of the reductions in insurance will come because the mandate’s repeal leads to fewer healthy people buying insurance, which in turn raises health insurance premiums, pushing some people in the private market off their plans. It’s not clear that kind of loss in coverage is voluntary at all.

You can see more details in Leiserson’s full presentation slides, and in a Tweet thread he posted explaining his analysis blending estimates of the tax law’s effect on actual tax bills with the effect on health insurance.