After loads of opposition, the Republicans have finally passed the biggest tax overhaul in three decades. The next stop? Donald Trump's desk. In the past few weeks, policy wonks and analysts speculated about the bill's legality, potential effects, and purpose, but now that it's gotten its final approval from Congress, many Americans are just wondering how the GOP tax plan will affect the middle class. After all, according to a 2014 Pew Research Center analysis, the middle class makes up half of America's population — and it's rapidly shrinking due to sky-high inequality.
According to the GOP, the purpose of the bill is to actually make the American tax code more manageable. To simplify the tax code, the GOP says it will cut down on itemized deductions and reduce income tax brackets. Trump himself has called the bill a "revolutionary change" for middle class America. This past October, the president said:
The biggest winners will be the everyday American workers as jobs start pouring into our country, as companies start competing for American labor, and as wages start going up at levels that you haven't seen in many years.
So, what exactly is the middle class? It depends on where you are — among other things. In fact, the Pew Research Center has a calculator for you to figure if you're a middle class American. Technically, the research center points to $55,775 as the average middle class income. However, it could vary depending on the state you're in, your educational background, and profession.
If you are a member of the middle class, here's how the GOP bill could affect you, for better or worse.
A Potential Tax Cut
On the surface, it seems like the middle class will get a tax cut. This will give a reported 1.6 percent bump in income to the average middle class family. It sounds nice — hard working Americans could do well with a moment to catch their breaths. But in the long run, the seeming benefit of such a cut may be outweighed by the massive 3.3 percent income bump richer households will see. In cold cash, it's a reported extra $870 for middle class households and a whopping additional $69,660 for upper class households. Plus, this provision will reportedly come to an end in 2025, meaning after a few years of a tax cut, middle class Americans might then see a big increase.
In addition to that difference in income boosts, the GOP tax gives a steep cut in corporate tax for big businesses. It slashes the previous 35 percent down to 20 percent. With a steep cut in corporate tax, massive corporations could sweep up at least $2 trillion in savings by 2027, according to the nonpartisan Tax Policy Center. That figure is much higher than the savings the middle class could receive in the next 10 years.
Grad Students Can Sigh With Relief
In one way, the bill might help middle class students is by no longer slapping a tax on tuition waivers. Initially, Republicans planned to impose taxes on tuition waivers until hundreds of students protested the GOP bill and the party removed the provision. A group statement from Republicans said that the "repeal of the income exclusion for graduate students would subject thousands of graduate students to a major tax increase at a time in their lives when they lack the ability to pay."
According to an Institute for Higher Education Policy report, about 70 percent of colleges remain unaffordable for middle class and working class students. In other words, this particular American demographic could do very well without such taxes forced by the GOP.
The Benefits May Eventually Reach The Middle Class
If mega-corporations are able to save trillions of dollars, their savings would likely remain among the top shareholders, not the middle class laborers — but conservatives in favor of the corporate tax deduction and repeal of the alternative minimum tax claim that the gains from the tax cuts would eventually reach the middle class.
Chairman of the White House Council of Economic Advisers Kevin Hassett said that it would take three to five years for the wealth to reach middle-class workers. But other analysts, like senior fellow at the nonpartisan Tax Policy Center Steven Rosenthal, told the Los Angeles Times it could be more like 10 to 20 years from now and described the way Republicans are selling the bill as "foolishness, complete foolishness."
In the long run, it seems as if the GOP bill is more likely to harm, not help, the middle class. Its short-term benefit in the form of tax cuts seems to be dwarfed by the long-term inequality it seems likely to produce by giving the upper class a massive advantage over others.
That much appears to be the general impression among the American public, too. According to an NBC News poll, only 24 percent of Americans think the GOP tax bill is good for the country. The majority, 41 percent, gave it a solid thumbs down.