On December 22, 2017, the Trump tax cuts were signed into law. Nearly one year later, the only ones benefiting are corporations and the wealthy.
President Trump was counting on his “Tax Cuts and Jobs Act of 2017” to deliver the goods for Republicans in the 2018 midterm elections, and repeatedly ran on them while stumping for Republican candidates leading up to November of 2018. According to the president, his tax cuts bill was going to be good for jobs, and bad for the rich.
“The rich will not be gaining at all with this plan,” Trump said of the bill in September of 2017.
However, Bloomberg took a look at how the wealthy have fared in the year that’s passed since the Trump tax cuts became official policy, and the rich are doing better than ever.
As the above chart shows, the bottom quintile of income earners, who made $14,170/year, saw their incomes go up by just 0.4 percent. Of course, 0.4 percent of $14,170 is just $56, which is comparable to the cost of a basket (not a cart, a basket) of groceries over the course of an entire year. Meanwhile, the wealthiest 20 percent of income earners, whose annual take-home pay is $347,940, saw their incomes increase by 2.9 percent, or at least $10,000/year.
Middle-class earners in the three middle quintiles saw negligible gains in their income in comparison to the richest Americans. Those earning $36,450 saw an average gain of $437 — roughly equal to a round-trip airline ticket over the course of a year. Americans earning $65,640 saw their incomes go up by $1050 after the passage of the Trump tax cuts, which may cover one mortgage payment on a modest home. The second-highest quintile of Americans, earning $114,370, saw an annual increase of $2,173.
While the top 20 percent is surely appreciative of the extra $10,000 they’ll be able to add their savings accounts — which are likely untouched, since they earn more than a comfortable salary — that $10,000 could be put to much better use in the hands of the lower three quintiles. As the Grit Post editorial board wrote in July, the bulk of U.S. economic growth has been coming from the poorest 60 percent Americans going deeper into debt to pay for basic necessities, according to a Reuters analysis.
This is a stark departure from past decades of consumer spending growth, which was historically driven by the wealthiest 40 percent of Americans. In January, Deutsche Bank economist Torsten Slok found that the percentage of families with more debt than savings was higher in 2018 than at any point in U.S. history since 1962 — including the Great Recession of the late 2000s.
The benefit of the Trump tax cuts for America’s largest corporations has been even more pronounced. As CNN recently reported, American corporations spent a whopping $1 trillion this year alone on buying back shares of their own stock. Typically, stock is used as a form of compensation for executives, and stock buybacks typically drive up shares of a company’s stock, resulting in higher pay packages for corporate CEOs. And it’s worth wondering if the slide in stock prices that’s been happening since October would have happened much sooner without the price inflation from corporate stock buybacks.
But while executives at these companies have been seeing a windfall in stock-related compensation, workers haven’t been sharing in those benefits. While there has been some job creation since the passage of the Trump tax cuts, much of that job growth has been happening in low-wage sectors like food service and retail — the kind of jobs that workers usually need two or three of just to make ends meet.
Companies that benefited from the Trump tax cuts, like Union Pacific ($6 billion benefit) and Verizon ($4 billion benefit) have actually laid off workers this year, with the former laying off roughly 540 workers and eliminating 200 contract positions, and the latter laying off more than 10,000 workers (who will be compensated) throughout 2019. General Motors, in the meantime, is laying off 15,000 workers and closing multiple plants, and retail giant Sears is in the midst of an ugly bankruptcy in which top executives are getting millions in bonuses while workers are still fighting for severance pay. Toys ‘R’ Us also shut down, firing 33,000 workers.
The total cost of the Trump tax cuts is approximately $1.5 trillion, which is roughly the same amount of student debt owed by 44 million borrowers across America. Bard College researchers estimated that forgiving all student debt would result in roughly $1 trillion in new economic activity as a result of tens of millions of people suddenly having more money to spend in local economies, which powers new job growth.
It could be easily argued that Trump could have made much more of a positive impact on the economy by instead floating a bill to forgive the $1.5 trillion in student debt, rather than give that money out in the form of tax cuts that primarily benefit corporations and the wealthiest Americans. And it seems more and more Americans are souring on the Trump tax cuts — even a Fox News poll found that, as of August 2018, Obamacare was more popular with Americans (51 percent) than the tax cuts (40 percent).
The new Democratic House majority has a lot of political capital to spend after their historic 40-seat gain in the midterm elections. Democrats can and should repeatedly vote to repeal the unpopular tax cuts, in the same vein as Republicans who repeatedly voted to repeal Obamacare when they controlled the chamber. While that bill will almost certainly not get brought up for a vote in the senate, where Mitch McConnell (R-Kentucky) is still in charge, it will give House Democrats a chance to constantly remind Americans that the party in charge of the federal government failed to deliver for their working-class constituents.