Trump’s tax law to boost incomes more in Republican states

WASHINGTON (Reuters) – A 2017 tax overhaul championed by President Donald Trump will cut household taxes more in Republican-leaning states than in states that lean Democratic, according to research published by the U.S. central bank on Tuesday.

The Tax Cut and Jobs Act, signed by Trump in December 2017, reduced tax rates for most Americans, boosting economic growth in 2018 while widening the federal budget deficit.

Trump has often cited the legislation one of his key achievements, although critics say the law mostly cuts taxes for high-income Americans and corporations. Many Americans are also getting smaller tax refunds or owed money than in the past.

The tax law’s long-term effects will include pushing after-tax incomes 1.6 percent higher in states that tend to vote for Trump’s Republican party, compared to a 1.3 percent gain in Democratic-leaning states, according to research published by the Federal Reserve Bank of Atlanta, one of 12 regional branches of the U.S. central bank.

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Households in Democratic-leaning states get less help because the law makes it harder to deduct state and local tax bills from a household’s federal obligations. State and local taxes tend to be higher in states that lean Democratic.

The researchers, which included Atlanta Fed economist David Altig and University of California, Berkeley economist Alan Auerbach, considered states to be leaning Republican or Democratic if one party’s share of the vote averaged at least 5 percentage points higher than that of the other party in the last five presidential elections.

For their estimates, the researchers assumed the tax overhaul would be made permanent. Congress, which was Republican-controlled when the bill was passed, made many of the tax cuts expire after 10 years so that the legislation could pass without Democratic support.

(Reporting by Jason Lange; Editing by Bill Berkrot)