In 2017, President Trump signed into law the Tax Cuts and Jobs Act. It was his signature achievement. Now that several years have passed since the law was enacted, what has been its impact? A little-noticed news story recently highlighted a new study of the law’s impact by four economists from Harvard, Princeton, the University of Chicago, and the Department of the Treasury.
First, the background.
No Democrats in the House or Senate voted for the bill. Along with his Republican congressional colleagues, Trump claimed that reducing taxes, especially on wealthy individuals and corporations, would create millions of jobs and that the tax cuts would pay for themselves. He said at the time there would be no addition to the national debt, and the cuts would be “rocket fuel” for the economy.
Republicans, who for the longest time opposed high deficits and increases to the national debt, ignored what their Democratic colleagues were saying. Democrats argued that the national debt would balloon by at least $2.2 trillion in the next 10 years, and the wealthiest would receive the lion’s share of tax savings. They said it was “a middle-class con job,” because people with middle incomes would see very little reduction in their taxes, or none at all. The Democrats also argued that corporations would create very few jobs but would either assign the savings to investment dividends or bonuses for a company’s executives.
A Gallup poll at the time of the bill’s passage noted, “There is little evidence that Americans were clamoring for a new tax law in 2017 before it was passed. The tax law received a very negative reading from the public in early December 2017, and … Americans have been negative about it ever since. Trump and Republican leaders have been unable to alter these apparently set-in-stone attitudes; the public as a whole remains negative.”
When the House and Senate were debating the cuts, I wrote in these pages that I thought that “the bill is simply politics, not policy.” The president and Republicans, who control both houses of Congress, needed a major legislative victory. It would do nothing to help the middle class, but would be a boon for people like, well, Donald Trump: Key winners were those, like Trump, in the real estate business.
The new study, which the New York Times calls “the most rigorous and detailed” yet, shows several outcomes.
- Foreign and domestic investments grew somewhat, because the act allowed corporations to deduct what they spend on investment from their income taxes. In fact, the main thrust of the Tax Cuts and Jobs Act was to reduce taxes on corporate income: a reduction in the corporate rate from 35 to 21 percent (President Biden in his State of the Union speech on March 7 asked Congress to raise it to 28 percent).
- One result was an increase in the size of the U.S. economy of 0.1 percent, modest growth but growth in any case.
- But the loss of federal revenue increased the national debt, adding some $100 billion a year.
- The impact on the working and middle class, including many Islanders, was far more modest than the bill’s supporters promised. The promise was growth of between $4,000 and $9,000 per year per worker, but the reality was only about $750, which averages out to just $62.50 a month.
The 2017 Tax Cuts and Jobs Act is set to expire next year. Republicans would like to renew it on a permanent basis. If Donald Trump is re-elected and has a Republican Congress, it will likely become a permanent feature of the economy. If Joe Biden is re-elected with a Democratic Congress, we might expect to see something very different: As he said in his State of the Union, he would like Congress to raise taxes on wealthy Americans and cut deductions on executive pay.
As Biden put it, “I’m a capitalist. You want to make a million, or millions, of bucks? That’s great. Just pay your fair share in taxes.” And, he added, the Trump-era tax cuts “exploded the federal deficit,” which in fact the above research shows it did.
Jack Fruchtman, who lives in Aquinnah, taught constitutional law and politics for more than 40 years.
The original “big lie” = trickle down economics.
We can spend money on ourselves a lot better than the government can spend our money on our behalf. The most recent example 13 billion for Haiti and a disaster more and more.
Again, to Charles Sennott and the publisher: since you have encouraged that letters to the editor focus on local issues, I don’t see why you are publishing articles like this, which belong in the NYT op-ed section, if they are able to get published there, or in the newsletter of the writer. I would request a consideration of the appropriateness of such articles. And to be clear, I agree with the writer on this and many other issues. But not in my local paper, it sticks out like a sore thumb.
Taxes are a local issue. Locals pay taxes. Real Estate, Town, County, State, Federal, Sales, Excise and use taxes, and fees. fees.
Who gets decide what belongs in the NYT op-ed section?
The 2017 tax cut sticks out like a sore thumb, it needs to bashed on the local, regional and national level.
It’s a grassroots effort.
Do you enjoy the Vineyard Gazette’s guest editorials of a national interest.
On February 21st, the MV Times published the following notice to its readers: “The MV Times welcomes Letters to the Editor on topics that are of interest and relevant to Islanders. Recently we have received a large number of letters, which is great, but an increasing percentage of these letters are weighing in on topics far beyond our shores, such as the war in Ukraine, the conflict between Israel and Hamas, the harsh partisanship of the presidential election, and other topics more global than local in nature. While we are interested in and care deeply about what is happening in the world, we are first and foremost a local news organization, focusing on events and news that impact the lives of our Island readership. Our Island is facing issues every day that range from the controversial to the practical. They include the education of our children, the impacts of climate change, the changing demographic of an increasingly diverse community, the care of our elders, holding our public officials accountable, and making sure all members of our community are represented and, when appropriate, celebrated in our news pages. Telling these stories is the responsibility of a good local news organization, and we want to hear your assessment of how we are doing. We invite your thoughts on how our community can work together to find solutions to the challenges we face. We hope you, our readers, continue to share your thoughts, opinions, and ideas so that we can amplify the voices of our community. We hope to hear from you soon.”
Since publishing this notice, the MV Times has since violated its own policy twice. Once with this op-ed about the effect of the Trump tax cuts and again on March 13th when it published a letter to the editor – “Vineyarders rally for ceasefire” – about the war between Israel and Hamas.
Taxes are relevant to Islanders.
Islanders are concerned about what is happening in Ukraine, and Palestine and Israel, the upcoming partisan elections.
MVT is privately owned, they set, and change, their policy as they see fit.
I want to see local discourse on regional and national issues.
Think globally, act locally.
I find the MVT to be more locally oriented than the Island’s senior newspaper.
Keep in mind that majority of both MVT and VG subscribers are not residents. They cater to their subscribers, their life blood.
I found the comments on Ukraine, the Monotheist’s ongoing war and taxes to be illuminating.
Not that many Islanders read the New York Times, some consider it to be a Leftist Rag, others, just plan snooty.
I think it would be beneficial to once more allow comments on letters. It’s clear that national and global issues are on the minds of many here, and when there’s no space available to discuss them, those thoughts understandably end up beneath articles dedicated to local matters.
Turning off commentary on Letters to the Editor is probably what led to increased submissions in the first place. At present, the only way to challenge falsehoods within a piece is to write our own. If we had the option to directly address the author, it would be more efficient for everybody involved. It may even lead to fewer off-topic posts, resulting in better focus on MV-related content, which is this paper’s stated purpose.
I hope the Times will give this option serious consideration.
Trickle down economy was first mentioned in the late 1890. The excact discription was the rich made more money which meant their horses produced more horse manure which in turn created more jobs for the poor to clean up the manure. Nothing has changed
Studies consistently show a positive effect of tax cuts on investment and economic growth. Economic theory also supports these results. The deficit has increased due to spending not due to less revenue from cuts. Are we to believe that the government can spend whatever it wants to and the resulting deficit is because people are not taxed enough. Nonsense.
Comments are closed.