WASHINGTON—Except for cutting corporate tax rates in half and funneling more money to the rich, the Donald Trump-GOP tax cut of two years ago appears to be a big fat dud or a loss.
And a new non-partisan report adds that especially goes for the GOP president’s promises to workers of raises – promises unions, leaders, and workers from coast to coast predicted would be lies.
Instead, the Congressional Budget Office reports, the promises Trump and the Republicans made, including a huge drop in federal revenues, didn’t show up, yet. And the benefits to individuals from increasing the standard deduction were swallowed up by other cuts regular taxpayers suffered, producing a wash. That wash was uneven, too: The rich got a lot, the rest of us got zip or even lost money.
Those appear to be key conclusions you can draw from reading the new analysis of the tax cut’s impact, courtesy the non-political CBO, in “The Economic Effects of the 2017 Tax Revision: Preliminary Observations,” issued May 22.
Unions, workers and their leaders knew it all along.
“Republicans feel like they’ve got to have a win, no matter what,” Steelworkers President Leo Gerard said as Trump and the GOP pushed their $1.5 trillion bonanza through Congress on party-line votes in the waning days of 2017. “Poor people, working people, old people be damned. And damned they are by the GOP scam.”
Trump and the GOP “increase taxes for many middle-class and low-income families just to give the wealthiest among us yet another undeserved advantage,” California AFL-CIO Executive Secretary-Treasurer Art Pulaski added. “It’s no surprise that this awful bill is deeply unpopular.”
CRS reported the tax cut succeeded in one big way: It cut the effective corporate tax rate in half, from 23% the year before the GOP passed it (2016) to 12% in the year after (2018). The effective rate is what companies or people really paid, on average – as opposed to the stated tax rates.
That big business rate cut, CRS noted, dwarfed a cut in the effective rate for individuals — people — in 2018. Before the Trump-GOP law, the effective tax rate for individuals was 29%. After? 27.2%.
Trump and the Republicans touted that business cut, though, along with provisions allowing corporations to take bigger tax breaks for immediate investment and for returning jobs to the U.S., as ways to get corporations to create or repatriate millions of jobs firms from overseas.
Didn’t happen, CRS said.
No wonder the GOP barely mentioned the tax cut on last year’s campaign trail. The voters had already come to the conclusion CRS statistically substantiated.
The CRS gives increased ammunition to critics of the cut. A report footnote says that doesn’t include more interest payments on the national debt to cover increased borrowing to pay for the tax cut from now through 2025. Outside analysts say interest will add $500 billion to the overall bill.
And, to top it all, CRS’s first figures show the tax cut’s real cost hasn’t shown up, yet.
“The Congressional Budget Office, in its first baseline update post-enactment, initially estimated” the tax cut “would reduce individual income taxes by $65 billion, corporate income taxes by $94 billion, and other taxes by $3 billion, for a total reduction of $163 billion in FY2018,” which ended last Sept. 30, CRS reported. CBO, like CRS, is non-political and non-partisan.
“Corporate revenues were about $40 billion less than projected whereas individual revenues were higher, with an overall revenue reduction of about $9 billion. From 2017 to 2018, the estimated average corporate tax rate fell from 23.4% to 12.1% and individual income taxes as a percentage of personal income fell slightly from 9.6% to 9.2%.”
Not only did workers’ tax rates barely fall – as CRS showed – but “real wages grew more slowly than GDP, at 2% compared with 2.9% for overall real GDP. Such slower growth has occurred in the past. The real wage rate for production and nonsupervisory workers grew by 1.2%.”
In other words, workers lost money to inflation, just as they did in many prior years before the Trump tax cut.
And remember Trump’s promise that money coming back into the U.S. would be reinvested in plants, jobs and higher pay? It came back all right, CRS said, and entered corporate pockets, instead.
“While evidence does indicate significant repurchases of shares, either from tax cuts or repatriated revenues, relatively little was directed to paying worker bonuses, which had been announced by some firms,” CRS said. And, CRS reminded readers, the corporate tax cuts don’t vanish in 2025. They’re permanent.
As for the $4,000-per-worker pay hike through a tax cut Trump touted, that didn’t happen either. CRS noted the money, if it comes, would be spread over the decade, too. But that’s an average. Other studies – though not CRS – said the rich would reap up to 83% of the benefits.
“Distributional analyses of the tax change suggested the tax revision favored higher-income taxpayers, in part because most of the tax cut benefited corporations and in part because the individual income tax cut largely went to higher-income individuals,” the dry CRS language says.
“During the debate about taxes, however, arguments were made that these corporate tax cuts would benefit workers due to growth in investment and the capital stock.” But the report finds those effects are “relatively small, with increases in labor productivity — which should affect the wage rate – to be negligible in 2018 and growing to 0.3% of GDP after 10 years.
Those wage hikes from productivity? “The total wage bill in the U.S. rose 0.2% in 2018, all because more workers found jobs and all workers toiled longer hours, CRS said. But when the tax cuts for individuals vanish in 2025, CRS noted, those wage gains vanish, too.
Foes of the Trump tax cut, including virtually every Democratic presidential hopeful, correctly predicted who would win and who would lose. Several have proposed repealing it, as have other congressional Democrats.
“The first thing I’d do is repeal the Trump tax cuts,” former Vice President Joe Biden said shortly after announcing his White House bid. “Get rid of the whole thing,” added another contender, Sen. Kamala Harris, D-Calif., said May 8 after a campaign speech in Detroit.
Not gonna happen, at least in this Congress, regardless of what Democrats say or CRS reports. After all, Senate Majority Leader Mitch McConnell, R-Kent., has ruled tax cut repeal out.
CONTRIBUTOR
Comments