Distributional Effects of Changes in Taxes and Spending Under the Conference Agreement for H.R. 1
CBO and the staff of the Joint Committee on Taxation provide information about the distributional effects of the conference agreement for H.R. 1.
This week, JCT published a distributional analysis that examined most of the effects of that legislation on revenues and on the portion of refundable tax credits recorded as outlays—including effects on premium tax credits stemming from eliminating the penalty associated with the requirement that most people obtain health insurance coverage. However, other spending changes related to eliminating that penalty were not included. In addition, the outlay effects of the oil and gas leasing provisions of title II were not included in JCT’s analysis.
CBO has allocated the budgetary effects of the spending changes across income groups. In making those estimates, CBO did not attempt to estimate the value that people place on such spending, which may be different from the actual cost to the government of providing the benefits. CBO also did not attempt to make any distributional allocations for people who will choose to obtain unsubsidized health insurance in the nongroup market and who will face higher premiums there compared with what would occur otherwise.
The combined distributional effect of the provisions analyzed by JCT and CBO was calculated by subtracting the estimated change in federal spending from the change in federal revenues allocated to each income group. The resulting changes in the federal deficit allocated to each income group are reflected in the letter’s table.
Overall, the combined effect of the change in net federal revenues and spending is to decrease deficits (primarily stemming from reductions in spending) allocated to lower-income tax filing units and to increase deficits (primarily stemming from reductions in taxes) allocated to higher-income tax filing units. Those effects do not incorporate any estimates of the budgetary effects of any macroeconomic changes that would stem from the agreement.