The tax cut bill on track for passage today will create 4,632 jobs in Alabama and boost the income of the average middle-income family by more than $519, according to a study released this week.
The estimates come from an updated analysis by the Tax Foundation, which projects that the Tax Cuts and Jobs Act will raise the gross national product by 1.7 percent nationwide over the long run and create 339,000 new jobs. What’s more, wages will grow by 1.5 percent, with after-tax income rising 1.1 percent by the end of the decade even after some temporary provisions expire, according to the think tank. The average middle-income family can expect an increase of $649.43 in take-home pay.
And that is assuming that Congress does not extend the tax cuts, as lawmakers did when supposedly temporary features of tax cuts passed under George W. Bush were set to expire.
“The increase in family incomes is due in part from individual income tax reductions and the broader rise in productivity and wages due to economic growth,” wrote Nicole Kaeding, an economist at the Tax Foundation. “These estimates take into account all aspects of the Tax Cuts and Jobs Act, including changes to the individual and corporate tax codes.”
The House of Representative passed the bill Tuesday but will have to come back and do it again today after lawmakers discovered a procedural problem.
For Alabama, the benefits would lag most of the rest of the country. The $519.43 increase in after-tax income exceeds the average gain in only five other states — Arkansas, Kentucky, West Virginia, Louisiana and Mississippi.
The state fares even worse on the jobs front. The Tax Foundation’s projected increases of 4,632 works out to a rate of 95.2 jobs per 100,000 residents. Only New Mexico, Arizona and Mississippi would have smaller job gains as a share of residents.
The Tax Foundation’s projected gains for both the nation and Alabama are not as robust as the think tank’s analysis of the version passed by the House last month. That report foresaw the creation of 890,000 jobs nationwide and increase of $2,243 in after-tax incomes.
Alabama’s position vis-a-vis other states did not change in the latest analysis.
The think tank attributes the lower projections to changes made to the bill during the legislative process. For instance, the just the difference between a 20 percent and a 21 percent top corporate tax rate is a tenth of a point of growth, a tenth of a point in wage increases and two tenths of a point of after-tax incomes, according to the foundation.
“The permanent corporate rate cut to 20 percent is the most growth-producing provision in either of the two plans,” wrote Tax Foundation President Scott Hodge before the House and Senate ironed out differences in their two bills. “The economic consequences of scaling that provision back should not be dismissed easily.”
The Republicans in Alabama’s delegation all voted “yes,” along with most of the GOP. The 227-203 vote included “nays” from a dozen Republicans. No Democrats supported it. The results likely will be the same when lawmakers vote again today.
“It will lead to greater economic growth, higher wages, and more jobs, which is exactly what the American people sent President Trump and the Republican Congress to Washington to do,” Rep. Bradley Byrne (R-Fairhope) predicted during debate on the House floor.
Rep. Gary Palmer (R-Hoover) praised the vote.
“Our tax plan not only puts more money in the pockets of the American people, but will also launch economic growth,” he said in a statement. “Over the previous eight years our economy only grew at an anemic 1.8 percent per year because businesses were shackled by a complicated and burdensome tax code that was designed for a 1986 economy.”
Sens. Richard Shelby (R-Tuscaloosa) and Luther Strange (R-Mountain Brook) joined the other 49 Republicans — ailing Sen John McCain (R-Ariz.) did not vote — in passing the bill in the upper chamber on a 51-48 vote. In a statement, Shelby called it a “once-in-a-generation opportunity to change Americans’ lives for the better.”
Rep. Terri Sewell (D-Birmingham), however, ripped what she termed a “tax sham,” objecting during floor debate to the GOP characterization of the bill as a Christmas gift to the American people.
“I have never seen such intellectual dishonesty in my life,” she said. “It’s more like the grinch that stole Christmas.”