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By Peter Coy @petercoy More stories by Peter Coy October 27, 2020, 11:42 AM EDT Vice President Joe Biden’s campaign website says , “Tax experts estimate that over the long run, 83% of Trump’s tax giveaway will flow to the top 1% of earners in this country.” That’s not quite fair to the president, though.While the Tax Cuts and Jobs Act of 2017 was far from perfect, it did cut taxes on the middle class and fueled the economic growth that brought unemployment rates to half-century lows before the pandemic.
The 83% claim comes from a study by the Urban-Brookings Tax Policy Center and refers to rates in 2027, which is after almost all of the TCJA cuts of individual income taxes are slated to expire.
A fairer benchmark is what would happen to taxes while the Trump cuts are still in place.In 2025, according to the Tax Policy Center, the top 1% would get 25% of the cut.That’s still a lot, but keep in mind that the top 1% also pay a lot.
After-tax incomes of people in the top 1% are estimated by the Tax Policy Center to rise 2.9% in 2025 vs.
a scenario of no change in the tax law.Here are the estimated increases for everyone else: the bottom fifth of households, up 0.4%; second fifth, up 0.9%; middle fifth, up 1.3%; fourth fifth, up 1.4%; and top fifth (which includes the top 1%), up 2.3%.So it’s fair to say that based on the TPC analysis, the tax cut is skewed to the rich, but it’s not as skewed as the Biden campaign one-liner implies.
The Tax Foundation, whose analyses tend to find better results from tax cuts than those of the Tax Policy Center, estimates the following changes in after-tax incomes in 2025: the bottom fifth of households, up 0.7%; second fifth, up 1%; middle fifth, up 1.3%; fourth fifth, up 1.4%; top fifth, up 1.8%, and top 1%, up 2.1%.
While it’s hard to separate out the impact of the tax cuts from other forces acting on the economy, a study last year by the Federal Reserve Bank of Dallas ( PDF ) estimated that the TCJA “likely boosted GDP growth by 0.8 percentage point and job growth by roughly 0.24 percentage point in 2018.”
One messaging problem for Trump on taxes is that he tends to overpromise, as he’s done in repeatedly pledging victory over Covid-19.
While running for president in 2015, he told Bloomberg he would cut taxes on the middle class but raises them on himself and other rich people: “That's right.That's right.
I'm OK with it,” he said.“You've seen my statements, I do very well, I don't mind paying some taxes.” That, of course, is not the way things turned out—even setting aside the fact that Trump used accounting maneuvers to lower his own federal income taxes in 2017 to $750 , according to documents obtained by the .
Liberal critics of the Trump tax cuts focus less on individual tax brackets and more on the overall impact of the law, including its big tax breaks for business.A report last year by the Economic Policy Institute says, “President Trump’s tax bill did not increase wages for working people, failed to spur business investments, decreased corporate tax revenues, and boosted stock buybacks in its wake.”
Deficit hawks focus on a different problem, which is that the tax cuts added to the federal debt at a stage of the business cycle when governments typically try to use a strong economy to reduce indebtedness.
Still, in the final days of a hard-fought campaign, it’s only fair to acknowledge that just about everyone, from rich to poor, got at least something out of the Trump tax cut.
Peter Coy Bloomberg Businessweek Writer @petercoy Peter Coy is the economics editor for Bloomberg Businessweek and covers a wide range of economic issues.He also holds the position of senior writer.
Coy joined the magazine in December 1989 as telecommunications editor, then became technology editor in October 1992 and held that position until joining the economics staff.He came to BusinessWeek from the Associated Press in New York, where he had served as a business news writer since 1985.
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