GOP presidential candidate and former Florida Gov. Jeb Bush’s just announced tax agenda would deliver huge tax cuts to those at the top—including for Jeb Bush himself. Based on CAP Action’s analysis of Jeb Bush’s 2013 tax return, his plan would have cut his own tax bill by $773,677 in 2013 alone.
Bush reported an adjusted gross income of $7,274,764 in 2013 and would significantly benefit from reducing the top tax rate from 39.6 percent to 28 percent. Bush’s income included a combined $730,898 of taxable interest, long-term capital gains, and dividends that qualify for reduced tax rates; Bush would further benefit if the top tax rates were lowered to 20 percent on these sources of income, as his tax plan proposes.
Media coverage of Bush’s tax plan has focused on its promise to limit deductions and exemptions, something that sounds like it would level the playing field. But surprisingly, Bush would actually benefit from the changes to exemptions and deductions that his plan proposes. Altogether, Bush would get $138,572 of itemized deductions under his plan, compared with the $56,980 he actually took in 2013.
How exactly does Bush benefit? His plan eliminates current-law limitations on itemized deductions, known as the Pease limitations, as well as the personal exemption phaseout, or PEP. Both of these limitations apply to high-income taxpayers. Under his plan, Bush does lose some of his itemized deductions, but Bush’s proposal to limit the value of certain itemized deductions to 2 percent of adjusted gross income would not affect his own tax return.
Bush would get a tax cut of $33,023 from repealing the 3.8 percent net investment income surtax from the Affordable Care Act, or ACA. CAP Action’s analysis assumes that Bush’s tax plan keeps the 0.9 percent ACA surtax on wages—which his plan does not mention specifically—but if Bush were to repeal this element of the ACA, he would receive an additional tax cut of $49,878. In total, repealing these two provisions of the ACA would have given Bush an $82,901 tax cut in 2013.
The tax cut that Bush would receive under his own plan is an estimate—applying a hypothetical tax code to a complex tax return. But it is likely a conservative estimate. The Democratic National Committee, for example, estimates that Jeb Bush would have saved $841,643 in 2013 under his plan. If Bush repeals the ACA surtax on wages, his own tax cut would be higher than the CAP Action estimate. CAP Action’s analysis also does not consider any of the corporate tax cuts in the Bush plan; the Congressional Budget Office estimates that the top 1 percent of households pays 48.7 percent of corporate income taxes, so those very high-income households would stand to gain the most from a corporate tax cut. The Bush family would also likely benefit from the elimination of the estate tax. Only the wealthiest 0.18 percent of estates paid any estate taxes in 2013.
As President George W. Bush promised in his sales pitch for tax cuts, Jeb Bush also promises that all Americans will benefit from huge economic growth under his plan. But we already know how things turned out after this earlier set of Bush tax cuts: Federal budget surpluses turned into massive deficits, and instead of widespread economic growth, Americans got the Great Recession. Even the conservative analysts at the Tax Foundation acknowledge that the top 1 percent would benefit the most from Jeb Bush’s plan, even assuming massive and widespread economic growth. But once their analysis focuses on the tax cuts themselves—rather than the promises of economic growth—they find that the plan would increase after-tax income 11.6 percent for the top 1 percent but no more than 3.1 percent for any income group in the bottom 90 percent.
The Tax Foundation also acknowledges that Jeb Bush’s plan would increase deficits by $1.6 trillion in the first 10 years alone—and that assumes that the tax cuts will generate economic growth to help pay for themselves. Without the extra economic growth, the Tax Foundation finds that the plan would cost $3.6 trillion over 10 years. Since middle-class programs such as Social Security and Medicare will need more revenue over the long term to meet the needs of an aging population, this plan is simply not sustainable for the nation.
Jeb Bush’s tax plan might work for Jeb Bush and his wealthy donors but not for ordinary taxpayers. The tax code certainly needs reform, but tax reform should make the system work better for all Americans, rather than tilting the playing field even further toward the wealthy few.
Harry Stein is the Director of Fiscal Policy at the Center for American Progress Action Fund.
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Director, Fiscal Policy