The Trump Tax Cuts Accelerated Economic Growth
By Palmer Schoening
Last month, millions of Americans filed their taxes for the first time under the Republican led Tax Cuts and Jobs Act (TCJA) that President Donald Trump signed into law around Christmas 2017. TCJA cut taxes for the vast majority of all Americans, though some Democrats in Congress along with many in the media dubbed this a “middle-class tax hike,” and a handout to the “one percent.” The fake news regarding tax cuts started well before the bill’s passage and continues to this day.
Take what then-House Minority Leader Nancy Pelosi predicted about TCJA when she said passage would mean “Armageddon” for America and that the bill “is probably one of the worst bills in the history of the United States of America.” Or when New York Times columnist Paul Krugman guaranteed a “global recession, with no end in sight.” The unrepentant gaslighting that has taken place over tax reform is rooted in dividing Americans for political gain or more clicks, rather than reporting facts.
According to the left-leaning Tax Policy Center, two-thirds of all Americans received a tax cut under TCJA, averaging approximately $2,200. Tax rates are lower at every single income level, especially those at low-to-middle income levels, with 80.4 percent earners receiving a tax cut––including 91.3 percent of the middle class–– while only 4.8 percent of the population saw their taxes go up, most of which are higher-income earners living in high-tax states.
In addition to the analysis from the Tax Policy Center, H&R Block recently reported that the average taxpayer saved roughly 25 percent on their tax bill and that refunds are up 1.4 percent compared to last year. These savings happened because the TCJA let families keep more of their money through a doubled child tax credit, doubled standard deduction, and lower rates across the board. Those changes combined with bold pro-growth cuts to the corporate tax rate, estate tax or “death tax”, alternative minimum tax, and creation of a new 20% small business deduction have increased take home pay for families and improved the economy.
The results so far despite the negative coverage are encouraging but many of these positive trends could fizzle out if Congress allows the individual tax changes to expire, as they are currently scheduled to in 2025. Following TCJA, House Republicans passed “tax reform 2.0” which made permanent the temporary changes in President Trump’s historic tax reform bill. Even while Democrats complained about the lower tax rates being temporary for families, but permanent for corporations, every single Democrat voted against making the tax cuts in TCJA permanent. Both parties, in light of the country’s rosier economic outlook, should put politics aside and work on providing small businesses and families certainty through tax permanence.
There is room for improvement in the next version of tax reform. Repeal of the estate tax, or more colloquially known as the “death tax,” would have been a huge net positive if passed within the TCJA for family businesses and farms that are planning for succession. According to the Tax Foundation, the death tax would have created up to 160,000 additional jobs by allowing families the ability to reinvest that money to expand their operations and hire more workers, rather than handing over 40 percent of their lifetime’s hard work to the government at death. The estate tax is also one of the costliest taxes to comply with, it brings in less than 1% of tax collections, and is a boon to the insurance and estate planning industry while siphoning money each year from family businesses and farms. Even presented with these facts, some cannot resist the siren song of dubbing this a tax cut for the rich, ignoring its inefficiency raising revenue and negative impact on jobs. Examples like this abound in the overwhelmingly negative coverage that tax reform has received since passage.
It is clear that the average Americans taxes went down significantly and that most American’s saw an increase in their paychecks throughout the entire year while receiving bigger refunds as compared to 2018. According to the Congressional Budget Office, millionaires’ share of the tax burden increased under TCJA. But don’t expect to hear those facts on the nightly news. Indeed, a recent New York Times editorial concluded: “To a large degree, the gap between perception and reality on the tax cuts appears to flow from a sustained — and misleading — effort by liberal opponents of the law to brand it as a broad middle-class tax increase.”
These pro-growth tax policies have led to impressive economic growth with a surge in new manufacturing jobs being created, capital investments increasing rapidly, and wage growth increasing by 3.4 percent in the most recent report. By every single metric, TCJA is truly, “Making America Great Again.” Congress should work together to lock in these tax cuts permanently for all Americans.