Policy: Economy

How would a single, childless, NYC renter fare under Mike Lee's tax plan?

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Beltway Confidential,Timothy P. Carney,Taxes,Senate,New York City,Economy,Mike Lee

Sen. Mike Lee, R-Utah, pitches his new tax plan as family friendly. So, what if you're not a "family"? How do you fare under his plan?

Childless, single, upper-middle-class New York City dweller Josh Barro covers Lee's plan at Business Insider and says, "when I ran Lee's plan against my 2012 taxes I found I would have gotten a $1,400 tax cut. His plan raises my top marginal tax rate from 28% to 35% but more than offsets that because most of my income only gets taxed at 15%."

Okay, but what about others in his situation but with different incomes? The various Barros, under Lee's plan, lose the deduction for their NYC taxes and their New York State taxes (and a Barro earning $70k pays about $5,700 to City Hall and Albany combined). Many of these Barros have lower marginal tax rates, while many — especially those earning more than $87,000 — have a higher marginal rate. All of them get a $2,000 credit under Lee's plan, but all also lose the personal exemption.

I calculated the federal income tax plus payroll tax for Josh Barros all along the income spectrum. This chart shows the distribution:

Lee's plan would be a small tax cut up to about $45,000 in income for Barro, then it grows wider until Barro hits about $147,000 in income — at that point, Lee's tax plan hikes Barro's taxes.

In short, it's a middle-class tax cut that makes the code more progressive, at least for single, childless, non-home-owning, New York City dwellers.

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