We join our friends Larry Kudlow and Steve Moore in calling on Congress to make the Trump tax cuts permanent.
We suspect most Americans figure if Congress passes a law, it’s forever, or at least until a future Congress amends or repeals it, but that’s not the case (surprise surprise) when it comes to taxes and the federal budget.
Due to some arcane Senate rules, the tax cuts in the Trump Tax Cuts and Jobs Act will start expiring in 2023.
As Messrs. Kudlow and Moore explained in a Wall Street Journal op-ed, if Congress does nothing, most Americans will pay more. The more generous child credit and the increased personal exemption, which are policies that Mr. Biden and the Democrats support, will be gone in 2025. Even more problematic for the economy is that the full expensing of capital investment for businesses begins to phase out next year…
Two years after the tax act passed four remarkable things happened. First, the economic growth rate rose back to 3% and was on track for closer to 4% in 2020 had it not been for Covid. Second, real median household income rose by almost $6,000 in two years—which was more than it rose during eight years under Barack Obama. Third, unemployment rates and poverty rates for blacks and Hispanics fell to at or below their lowest level in at least 25 years.
Last but not least, the share of taxes paid by the richest 1% of Americans actually rose. Income tax payments from the rich rose from 37% to 39% of the total tax take, while all other income groups paid a smaller share. There was an undeniable “Laffer Curve” effect—lower rates generated more growth and more tax revenues from the rich.
Up until COVID hit here’s how the economy responded:
Workers’ networth soared. Low- and middle-class families saw the largest gains in wealth growth in 2018 and 2019, according to the Federal Reserve. Low-income families saw their net worth increase 37%. Middle-class families saw their net worth increase 40%.
Household Income Reached New Highs. Real median U.S. household income in 2019 rose nearly 50% more than during the eight years of Barack Obama’s Presidency. Median household incomes increased 7.1% for Hispanics, 7.9% for Blacks,10.6% for Asian Americans and 8.5% for foreign-born workers.
Wages for Minorities Grew at a Faster Pace. Compared to Obama’s second term, wage growth, as a measure of median usual weekly earnings, grew 24% faster for Hispanics, 79% faster for Blacks, and 95% faster for Asian Americans.
Wages for Women Grew at a Faster Pace. Compared to Obama’s second term, wage growth, as a measure of median usual weekly earnings, grew 60% faster for women.
Wages for Youths (Ages 16-24) Grew at a Faster Pace. Compared to Obama’s second term, wage growth, as a measure of median usual weekly earnings, grew 70% faster for women.
Wages for All Levels of Educational Attainment Grew at a Faster Pace. Compared to Obama’s second term, wage growth, as a measure of median usual weekly earnings, more than doubled for those with less than a high school diploma and those with either some college or have an associate degree.
Income data published by the IRS clearly show that on average all income brackets benefited substantially from the Republicans’ tax reform law, with the biggest beneficiaries being working and middle-income filers, not the top 1 percent, as so many Democrats have argued.
As Justin Haskins, director of the Socialism Research Center at The Heartland Institute, explained in an article for The Hill, Trump’s 2017 tax reform law did exactly what was promised: It lowered taxes for all income groups, provided the greatest benefits for middle-income households, and spurred economic growth that helped reduce poverty and improve prosperity.
Congressional Democrats have argued that one of the best ways to pay for the legislation is to raise taxes on wealthy households, which, according to many on the left, have benefited disproportionately and unfairly from the 2017 tax reform law passed by Republicans and signed by former President Trump. The latest data, however, proves that this claim is pure mythology. It would be a grave mistake for Democrats to eliminate key parts of this important legislation.
The toll-free Capitol Switchboard (1-866-220-0044), call today and tell your Senators and Representative you want Trump’s tax cuts to be made permanent, not repealed as Democrats are planning.
Trump Tax Cuts and Jobs Act
Make Trump tax cuts permanent
full expensing of business investment
child tax credit
median household income
unemployment
economic growth
poverty