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New study confirms ordinary Americans got fleeced by the Trump tax bill

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Sorry, America’s middle class: President Donald Trump’s signature tax code overhaul has not generated any meaningful new economic growth that wasn’t already underway, the nonpartisan Congressional Research Service (CRS) has found.

The new numbers inject further complexity into a contentious and ongoing debate around the landmark tax legislation as to who actually benefited from its passage. But the study should also offer additional clarity: With hard numbers now available on the economy’s performance in the first full year of the legislation, it’s easier than ever to talk instead about who got what and how — and the answers, so far, aren’t pretty.

Large corporations with shiny accounting departments ended up being the largest beneficiaries of the tax bill’s largesse, with the rate of tax they actually pay dropping by half in 2018, according to the CRS analysis. But the vanishingly insignificant comparative break Trump’s law gave workaday people lays the game bare. This tax bill is already reshaping the real-world economy in ways that limit the prospects of ordinary people, potentially reinforcing the structural inequities that adversely impact democratic society.

Trump and his congressional allies had forecast massive jumps in GDP growth and working-family incomes from the package. None materialized in year one. Annual growth hit 2.9% – identical to the 2015 mark, well below the 3.3% the Congressional Budget Office forecast when it sought to predict the tax bill’s impact in April of 2018, and right in line with what the CBO had predicted the economy would have done without Trump’s corporate-tax munificence.

The report’s findings underscore the deceitful nature of the administration’s first-term sales pitch.

Working people were supposed to benefit from the slashed corporate income tax rate and related rules tweaks intended to lure offshored profits back into the U.S. economy. American companies weren’t hiding $3 trillion in profit outside the country out of malice, the argument went. Rather, they were afraid of seeing it taxed too sternly, and would happily bring it home to make productive and equitable use of it just as soon as they felt it was safe from the taxman.

Some business heads dutifully followed this script in small and symbolic ways shortly after the law was signed, issuing year-end bonuses to their frontline employees and accompanying them with heavy fanfare in the press. But even the high-end estimates of those bonus payments account for less than 3% of the money corporate payers got handed back to them by the tax law. Those bonuses may have had as much to do with firms’ recognition that falling unemployment rates would make it easier for unhappy workers to leave for greener pastures, the CRS report notes.

So what happened to the other 97% of the money corporate accountants were handed by the government? A trillion dollars of it went to shareholders, as the law triggered a record wave of stock buybacks – an unproductive back-scratching activity that keeps the money firmly ensconced in upper-class hands that have little reason to spend that new cash back into the economy where working stiffs make their living.

This grand act of class solidarity between wealthy elected officials, wealthy corporate executives, and wealthy investors was entirely predictable. Corporate tax repatriation enticements and rates-slashing typically generate this kind of unproductive reshuffling of capital – thereby reinforcing the working class’s sense that they aren’t even being dealt into the hand.

Such stark differences in outcomes for the masses and the privileged few help fuel the populist anger that’s on the march across nearly every developed democracy on the planet.

Wages – a more stable indicator of how much wealth capitalists are allowing to pass through to their labor than any one-off bonus – offer no respite from the gloomy CRS diagnosis. Blue-collar wages rose just 1.2% in 2018 after accounting for inflation, the report’s authors found, which “indicated that ordinary workers had very little growth in wage rates.”

Out of every three taxpayers, roughly two owed the government less this tax year than they had prior to the new tax law. Many people who got a tax cut in year one appear not to have noticed, as the New York Times’ Jim Tankersley and Ben Casselman reported recently, because the annualized cut was spread across a year’s worth of paychecks instead of lumped together at year end.

But whether working families noticed the new money or not, the combined effect of those modest middle-class cuts and the massive corporate giveaways that make up the bulk of the Trump tax law’s price tag were supposed to load the economy’s engine with high-octane juice. The working theory was that this “2 Fast 2 Furious” boom would rain new revenue down on the treasury with such swift thoroughness that the public would neither notice nor care that a large amount of its collective money got handed over to wealthy multinational companies. The cut, its proponents insisted, would pay for itself.

A year on, the tax bill is miles behind the trajectory required to make that promise plausible. The authors of the CRS study calculate that the tax law’s 2018 performance generated “5 percent or less of the growth needed to fully offset the revenue loss” in year one.

“Much of the tax cut was directed at businesses and higher-income individuals who are less likely to spend,” the CRS researchers wrote. “On the whole, the growth effects tend to show a relatively small (if any) first-year effect on the economy.”

That mathematically correct conclusion misses an important wider point about public policy choices. The bill has had a huge effect on what kind of economy we have, if not on the size of that economy as measured in the stats these analysts parse. Inasmuch as the costs of the bill could have been spent on other people if their government had made other choices, the tax law is redistributing wealth upward, providing the wealthy investor class a jolt of money they have no reason to spend.

Everyone else saw a relative pittance – enough money to make a difference to a working family, but a tiny fraction of the public money federal lawmakers chose to give to private companies and their shareholders through these changes – and none of the wider opportunity-sparking growth promised by the people marketing the bill 18 months ago.

Tax cuts that don’t pay for themselves are not automatically illegitimate. When such subsidies are bestowed on Main Street economies, they can boost the virtuous cycles of consumer spending that working-class communities need in order to provide a stable economic foundation.

The tax cut former House Speaker Paul Ryan (R-WI) put on Trump’s desk has instead subsidized the wealthy, just as the GOP intended.

This article was originally published at Think Progress on May 30, 2019. Reprinted with permission. 

About the Author: Alan Pyke  covers poverty and the social safety net. Alan is also a film and music critic for fun. Send him tips at: [email protected] or


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If Workers’ Share Of National Income Were At The Post-War Average, They Would Earn An Extra $740 Billion This Year

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Image: Pat GarofaloSince 2009, 88 percent of national income growth has gone to corporate profits, while just one percent has gone to wages, adding another chapter to the decline of the middle class, whose incomes have been shrinking and wages stagnating for decades. In fact, according to data analyzed by the Financial Times, workers’ share of national income has fallen to its lowest level on record, and if it were back at the post-war average, workers would earn an additional $740 billion this year:

“We are the 99%”, the slogan of Occupy Wall Street, is a reference to the rising wealth of the top 1 per cent of US income distribution. But an equally valid slogan might be: “We get 58%”.

That figure is the share of US national income that goes to workers as wages rather than to investors as profits and interest. It has fallen to its lowest level since records began after the second world war and is part of the reason why incomes at the top – which tend to be earned from capital – have risen so much.If wages were at their postwar average share of 63 per cent, workers would earn an extra $740bn this year, about $5,000 per worker, according to FT calculations.

This decline in workers’ share of income is actually holding back the national recovery, as “workers on lower wages consume much of their income, while higher wage earners and those with capital income are more likely to save.” Instead of going to the people who are likeliest to spend it, and thus boost the economy, more income is going to corporations and rich people who are just sitting on it. Corporations are actually holding trillions of dollars in cash reserves (and clamoring for more tax breaks), money that could create millions of jobs if it were deployed in a different fashion.

This blog originally appeared in Think Progress on December 15, 2011. Reprinted with permission.

About this Author: Pat Garofalo is Economic Policy Editor for ThinkProgress.org at the Center for American Progress Action Fund. Pat’s work has also appeared in The Nation, U.S. News & World Report, The Guardian, the Washington Examiner, and In These Times. He has been a guest on MSNBC and Al-Jazeera television, as well as many radio shows. Pat graduated from Brandeis University, where he was the editor-in-chief of The Brandeis Hoot, Brandeis’ community newspaper, and worked for the International Center for Ethics, Justice, and Public Life.


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