sen. Rick Scott (R-FL), chairman of the National Republican Senatorial Committee, has proposed an 11-point plan to “save America,” including this: “All Americans should pay some income tax to have skin in the game, even if a small amount. Currently, more than half of Americans pay no income tax.”
The Tax Policy Center estimates that meeting Scott’s goal could raise federal income taxes by more than $100 billion by 2022 alone. More than 80 percent of the tax increase would be paid by households earning about $54,000 or less, and 97 percent would be paid by those earning less than about $100,000.
Since Scott didn’t say how his plan would work, TPC analyzed a simple version that was consistent with his idea. It would create a minimum tax of $100 for unmarried applicants and $200 for couples filing jointly. In other words, every household should pay at least $100 in federal income tax each year, regardless of their income. Other versions of Scott’s idea would carry a different price tag, though all of them would be a burden to low- and middle-income households in the first place.
Estimating tax increases
A minimum income tax for all households would effectively eliminate the refundable portion of tax credits such as the Child Tax Credit and the Earned Income Credit. It would reduce the value of the standard deduction for millions of low- and middle-income households, although increasing that deduction was a key element of the GOP’s 2017 Tax Cuts and Jobs Act (TCJA).
TPC estimates that the lowest-income households — earning less than about $27,000 a year — would pay nearly $1,000 more in taxes on average by 2022, reducing their after-tax incomes by nearly 6 percent. Low-income families and children would pay the most: Reaching Scott’s goal would reduce their after-tax income by more than $5,000 or more than 20 percent.
A Scott-esque plan would raise taxes on middle-income households by an average of $450.
As Scott himself said, “I warn you, this plan is not for the faint of heart.”
It also runs counter to the long-standing Republican tax-cutting orthodoxy: Ronald Reagan made the abolition of the income tax for low-income households a cornerstone of the Tax Reform Act of 1986.
And it seems to conflict with other elements of Scott’s own plan. For example, in a section titled “Family,” he states, “The nuclear family is critical to civilization, it is God’s design for mankind,” adding, “Families are crucial in raising young men and women of character and responsible members of society. †
It’s also worth noting that Scott’s claim that “currently more than half of Americans don’t pay income taxes” is outdated and greatly exaggerates the matter. Many more households have skin in the game than Scott claims.
Who does not pay income tax
The proportion of households that did not pay federal income taxes fluctuated until the pandemic in the low to mid-1940s. By 2020, that has increased to more than 60 percent. This was partly due to massive COVID-19-related job losses and a related drop in incomes. In addition, the three rounds of Economic Impact Payments (incentive checks) in 2020-2021 are structured as refundable tax credits. And Congress increased the child tax credit for the vast majority of parents. All of this significantly reduced the income taxes of more than a hundred million households, temporarily turning many from payers of small amounts of federal income taxes into non-payers.
The proportion of those who do not pay federal income taxes remained very high in 2021, at about 57 percent. But the economy recovered, federal aid stopped and the number of non-income taxpayers is plummeting. TPC estimates that only about 42 percent will pay no federal income tax this year and that the stock will slowly but steadily decline into the high 30s by the end of this decade.
It’s also important to note that many of these households pay other federal taxes, including payroll and excise taxes. For example, less than 17 percent of households will not pay income or payroll taxes this year – many of them are older adults with lower incomes. And almost everyone pays some state or local taxes, including sales tax.
Scott is right about one thing. His plan is not for the faint of heart. And it will likely leave GOP Senate candidates with some explanations in the upcoming election.