Many on the left believe that the 2017 tax reform law passed by Republicans and signed by former President Trump benefited wealthy households disproportionately and unfairly.
The Senate has taken up President Biden's and legislative Democrats' Build Back Better (BBB) Act. The bill's passing will definitely be challenging due to the parliamentary body's 50-50 political divide.
To pass BBB, Democratic Senate leadership must persuade moderates like Senators Kyrsten Sinema (D-Ariz.) and Joe Manchin (D-W.Va.) that the bill's $2.4 trillion price tag can be offset by boosting the IRS and its enforcement activities while enacting significant tax reform provisions.
Many on the left believe that the 2017 tax reform law passed by Republicans and signed by former President Trump benefited wealthy households disproportionately and unfairly. Congressional Democrats have argued that raising taxes on wealthy households is one of the best ways to pay for the legislation. The most recent statistics, on the other hand, shows that this assertion is a complete fabrication.
The IRS's income figures plainly reveal that, on average, all income categories profited significantly from the Republicans' tax reform package, with working and middle-income filers benefiting the most, not the top 1%, as many Democrats have claimed.
A careful analysis of the IRS tax data, one that includes the effects of tax credits and other reforms to the tax code, shows that filers with an adjusted gross income (AGI) of $15,000 to $50,000 enjoyed an average tax cut of 16 percent to 26 percent in 2018, the first year Republicans’ Tax Cuts and Jobs Act went into effect and the most recent year for which data is available.
Filers with adjusted gross income of $50,000 to $100,000 enjoyed a 15 percent to 17 percent tax benefit, while those with adjusted gross income of $100,000 to $500,000 saw their personal income taxes slashed by roughly 11 percent to 13 percent.
By contrast, no income group with an AGI of more than $500,000 had an average tax cut of more than 9%, and the average tax cut for brackets starting at $1 million was less than 6%. (For more detailed data, see my table published here.)
That implies that most middle- and lower-income taxpayers got a tax cut that was at least double the amount of the tax cuts given to those making $1 million or more.
Furthermore, IRS data reveals that after the enactment of the tax reform bill, higher-income individuals provided a larger share of overall income tax revenue than they did the prior year.
In reality, every income group with filers earning $200,000 or more paid a lower proportion of the total personal tax revenue collected in 2018 than in 2017, while every income bracket with a maximum limit less than $200,000 paid a higher proportion of the total personal tax revenue collected in 2017.
That means that Republicans' tax reform bill made the tax system marginally more progressive, contrary to what Democrats have maintained for the last four years.
Furthermore, the IRS data suggests that the tax reform package — which featured a range of company tax cuts, including a significant fall in the corporate income tax rate - aided economic mobility.
Every income group with a top level less than $25,000 had a decrease of filers, while every income bracket with a top level greater than $25,000 saw an increase, with the highest growth in the brackets with a floor of at least $100,000.
The truth is that Republicans' 2017 tax reform package delivered precisely what they promised: it decreased taxes for all income categories, with the biggest gains going to middle-income families, and sparked economic development that helped to eliminate poverty and increase prosperity.
Democrats would be making a big mistake if they attempted to repeal crucial provisions of this essential law.