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Who would benefit from the bipartisan tax bill?

If passed, the Tax Relief for American Families and Workers Act would convey the most significant benefits to low-income families, explains Johns Hopkins economist Robert Moffitt

Robert A. Moffitt is a professor of economics in the Krieger School of Arts and Sciences at Johns Hopkins University with a joint appointment at the Johns Hopkins Bloomberg School of Public Health. His research interests include the areas of labor economics and applied microeconometrics, with a special focus on the economics of issues relating to the low-income population in the U.S. Much of his research in labor economics has concerned the labor supply decisions of female heads of family and its response to the U.S. welfare system.

Robert Moffitt

Image caption: Robert Moffitt

The Tax Relief for American Families and Workers Act of 2024 passed through the House of Representatives with overwhelming bipartisan support on Wednesday, but its future is murky in the Senate.

If passed, the package would have a little something for everyone, Moffitt says, with the largest benefits for low-income families—a group that stopped receiving more generous credits tied to the now-expired American Rescue Plan.

What do we need to know about this tax package?

Like many bipartisan tax legislations, the proposed tax package would have benefits in terms of lower taxes or higher benefits for almost every family in the country, but some families would get more than others. The largest beneficiaries in terms of percent changes in their incomes would be low-income families with children, who would see higher tax credits if their incomes fall roughly in the $10,000 to $40,000 range. Families with more than one child would receive the largest additional benefits. Most middle-class families would benefit from reductions in taxes related to businesses, but the percent increase in income would be smaller than those for lower-income families with children. Very high-income families would also benefit from lower corporate and other business taxes. But the bill would be paid for by increasing federal collection of monies from a large pandemic program that benefitted businesses. It's not known whose incomes those provisions would affect, but probably families with somewhat higher incomes.

What does this mean for average American families and business owners?

For the average American family and business, the package would mean very little. That makes it somewhat different than many tax packages, which often target the biggest benefits to the middle class. This package targets benefits for very low-income families and for relatively high-income families, with smaller (but not zero) benefits for those in the middle.

What happens next? If it passes, when would taxpayers start feeling the impact in their day-to-day lives?

What happens next is that the package goes to the U.S. Senate, where its fate seems to be unknown. But if it were passed soon, it would have an immediate effect by changing taxes even for 2023—that is, when families file their tax returns this spring. Many of the benefits would grow in 2024 and 2025, at least those for low-income families. The package as currently written only covers 2023, 2024, and 2025, so what happens after that will depend on future Congresses.