November 22, 2019

THE PROMISE: IT WILL BE A MIDDLE-CLASS TAX CUT

“Our framework ensures that the benefits of tax reform go to the middle class, not to the highest earners.” – President Trump, Oct. 11, 2017 [USA Today]

“The rich will not be gaining at all with this plan.” – President Trump, Sept. 13, 2017 [The Guardian]

 

Source: Institute on Taxation and Economic Policy (ITEP), “TCJA by the Numbers, 2020.” https://itep.org/tcja-2020/

The richest 1% of taxpayers will get an average tax cut of $50,000 in 2020 from the Trump-GOP tax cuts. That’s over 75 times more than the tax cut for the bottom 80% of taxpayers, which will average $645.

Source: ITEP, “TCJA by the Numbers, 2020.” https://itep.org/tcja-2020/

In 2020, the richest 1% will receive a total of $78 billion in tax cuts from the Trump-GOP tax law—more than a quarter of the total. That’s about the same amount as the bottom 80% of taxpayers will get.

Source: ITEP, “TCJA by the Numbers, 2020.” https://itep.org/tcja-2020/

The Trump-GOP tax cuts disproportionally benefit white Americans at the expense of other racial groups. In 2020, whites will make up 67% of tax filers but will garner 79% of the tax cuts. On the other hand, African Americans will comprise 10% of all filers yet only receive 5% of the benefits. Latinx will be 12% of filers but get only 7% of the tax savings.

Source: ITEP, “Corporate Tax Avoidance in the First Year of the Trump Tax Law.” Dec. 2019. https://bit.ly/34t3HDq

The Trump-GOP tax cuts were focused first and foremost on cutting corporate income taxes. The law slashed the U.S. corporate tax rate on domestic profits from 35% to 21% and on foreign profits to about 10%. The law expanded the ability to write off equipment purchases, and granted corporations other big favors, but it did not close corporate tax loopholes. As a result, 91 profitable Fortune 500 corporations paid no U.S. corporate income taxes in 2018. Moreover, 379 profitable corporations paid an effective federal income tax rate of just 11.3% on their 2018 income, slightly more than half the 21% corporate tax rate—which already had been slashed down from 35% in 2017.

Sources: Center for American Progress. Data from Bureau of Economic Analysis (BEA), “National Accounts (NIPA): Sections 3 and 1; Table 3.2, Line 8; Table 1.12, Line 15.” https://apps.bea.gov/iTable/iTable.cfm?reqid=19&step=2 – reqid=19&step=2&isuri=1&1921=survey

Corporate profits have increased at a healthy rate since the Trump-GOP tax cuts were enacted but corporate tax receipts have plummeted—by more than 40%. That’s because the law slashed the corporate tax rate from 35% to 21% on domestic profits and to just 10% on U.S. corporate offshore profits.

Source: Federal Tax Receipts from U.S. Treasury, Monthly Treasury Statements, Table 7. Fiscal year monthly data presented on a calendar basis. Note: 2019 data represents nine months annualized. https://www.fiscal.treasury.gov/reports-statements/mts/previous.html

Corporate tax revenue has collapsed due to the GOP tax cuts. It fell by nearly one-third, or $92 billion between 2017 and 2018 and is on track to be at roughly the same depressed level in 2019. Those totals are about 40% lower than the $349 billion collected in 2014.