With the 2020 election campaign heating up, the Republican tax cuts enacted in 2017 will be a major topic of debate. Most Republicans defend the tax cuts, while most Democrats want to repeal them. The two sides can debate the pros and cons of the tax cuts during the campaign, but before the debate goes any further, the media needs to stop mischaracterizing the tax cuts.
The Tax Cuts and Jobs Act was one of the most comprehensive tax overhauls ever enacted, a 185-page bill of individual, business, and international tax reforms. Yet as far as the media is concerned, the bill only slashed taxes for corporations and the wealthy.
For the past two years, the media has written story after story misrepresenting the tax cuts, repeatedly labeling them as “tax cuts for corporations and the wealthy.”
This characterization of the bill is false and misleading, yet it is an assertion endlessly reported by reporters and pundits in the national media, as well as Democrats.
Before the bill was even passed, the New York Times reporter Alan Rappeport wrote in September 2017 that the Republican tax plan “would overwhelmingly benefit the wealthiest Americans and businesses.” In November 2017, Washington Post columnist Catherine Rampbell called the bill “tax cuts for corporations and the wealthy,” and in October 2018, she called it a “giveaway to corporations and the rich.” Paul Waldman of the Washington Post parrots the same media view, writing in February 2019 that the “bulk of the benefits of the tax cuts went to the wealthy and corporations.” Earlier this month, MSNBC’s Joe Scarborough was even more specific, writing that the Trump tax cuts were for “multinational corporations and millionaire members inside his club.”
All of these statements are incorrect, as a review of official government estimates clearly shows. The Congressional Joint Committee on Taxation, which is staffed by professional economists, lawyers, and accountants, provides revenue estimates and analysis for every tax bill considered by Congress. The committee’s report on the Republican tax cuts shows that the overwhelming bulk of tax cuts go to individuals, not corporations, and the bulk of these tax cuts go to millions of taxpayers earning far less than the wealthiest Americans.
The Joint Committee estimate of the budget effects of the tax cut over 10 years projects net individual tax cuts of $1,126.6 billion and net business tax cuts of $329.4 billion, for a total tax cut of $1,456.0 billion, rounded up in the media to a $1.5 trillion tax cut.
Simple math shows that 77.4% of the tax cuts goes to individuals, and only 22.6% goes to corporations.
The corporate rate reduction from 35 to 21% is estimated to reduce corporate taxes by $1.3 trillion. But the cost of this rate cut is offset by about $1 trillion in increased revenue from loophole closers, limits on deductions, and other corporate tax increases. This means that more than three-fourths of the corporate rate reduction is paid for by other corporate tax increases. That is hardly a giveaway.
The Joint Committee report on the bill also shows that most (86%) of the tax cut goes to taxpayers earning less than $1 million a year. More than half of the tax cuts goes to those with income between $30,000 and $200,000 a year. About 95% of individual taxpayers receive a tax cut, averaging an 8% cut. The largest percentage tax cuts (13.5%) go to those earning between $20,000 and $30,000. The smallest tax cuts (5.9%) go to those earning $1 million and more. This wealthiest group of taxpayers also has the largest percentage (13.8%) of taxpayers facing tax increases under the bill.
So, as these facts shows, it is simply not correct to claim that the tax cuts mainly benefit corporations and the wealthy. The overwhelming share of the tax cuts go to individuals, not corporations, and the overwhelming share of the tax cuts go to households far below the top of the income range. The media needs to get the facts straight and stop misrepresenting the Republican tax cuts.
Bruce Thompson is a contributor to the Washington Examiner‘s Beltway Confidential blog. He is a Washington consultant. He was the assistant secretary of Treasury for legislative affairs during the Reagan administration.
