Democrats are vowing to repeal the GOP’s 2017 tax reform bill, starting with raising the corporate income tax. The Democrat-controlled House Ways and Means Committee recently held a hearing laying the groundwork for this tax increase, falsely claiming that the corporate rate was lowered at the expense of middle-class families.
Reality belies this rhetoric. The corporate tax reduction from 35% to 21% has benefited families and workers alike by growing the economy, raising wages, and creating new jobs.
It’s no coincidence that, in the two years since the tax cut, unemployment has dropped to a 50-year low. It has hit all-time lows for key demographics including women, African Americans, and Hispanics. Thanks to these pro-growth policies, nearly seven million jobs have been created since Trump took office, and there are now fewer unemployed people than job openings.
Wages have also grown.
Annual hourly earnings have grown by 3% or more in the past 12 months. In fact, real median household income has increased by over $5,000 during Trump’s tenure, according to data released by Sentier Research. In addition to this wage growth, the tax cuts have allowed businesses to expand, hire new workers, and increase pay and benefits.
Savings are also on the rise.
When Trump was elected president, the Dow Jones sat at 18,332. It is now at roughly 29,000, an increase of about 60%. This stock market growth benefits the 100 million 401(k)s, the 46.4 million households that have an individual retirement account, and the nearly $4 trillion in public pension funds, half of which is invested in stocks.
And the Congressional Budget Office has revised revenue up by over $1.2 trillion, 80% of the cost of the tax cuts, due to improving economic conditions since the tax cuts were passed.
Prior to tax reform, the U.S. had the highest corporate rate in the developed world. Today, the rate is in line with the rates of other countries. The tax reform bill also contained more than just tax cuts for business. Families and individuals across every congressional district are seeing tax reduction, with a family of four earning the median income of $73,000 seeing a tax cut of $2,000, a nearly 60% reduction in taxes.
Voters clearly approve of the economy.
Recent polling has found that 76% of the public rates economic conditions as “very good” or “somewhat good,” including 75% of independents. Meanwhile, 90% of people reported being satisfied with their personal life, an all-time high.
Despite all this good news, Democrats claim that the benefits to businesses far outweigh any benefits to the middle class. Often, they point to the fact that some corporations have low federal income tax liability.
This is misleading. Companies are still paying state and local taxes, as well as payroll taxes, which often total billions of dollars. This argument also ignores the true reason why companies have low tax liability: the existence of a number of credits and deductions intended to promote investment and job creation. For instance, full business expensing allows the deduction of new investments while the research and experimentation tax credit encourages companies to innovate.
These are not “loopholes,” as some claim; they are bipartisan proposals that were supported by the Obama administration. For instance, the Obama administration said that expensing “will help businesses expand and hire” and that every $1 in tax reduction from the research and experimentation tax credit creates $2 in benefits to the economy, with 80% directly attributable to workers.
If Democrats have their way and raise the corporate rate, the economy and workers will be worse off. In fact, the Tax Foundation estimates that increasing the corporate tax rate back up to 35% could cost 413,000 jobs and reduce the size of the economy by 2.1% over the long term.
Utility savings for households are another benefit of the corporate rate reduction. As a direct result of the corporate rate cut, utility companies in all 50 states reduced their prices. That means lower monthly electric, gas, and water bills for households and businesses. If Democrats raise the corporate rate, they will be saddling households with higher utility bills.
The Left won’t stop there, either.
Democrats have proposed trillion-dollar annual tax increases that include payroll tax increases, small-business tax increases, income tax increases, and even an increase in the “death tax.” The fact is, corporate tax cuts have grown the economy, lifted wages, and created more jobs. Democrats would undo these gains and harm middle-class families.
Hendrie is director of Tax Policy at Americans for Tax Reform.
