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National review
Trump’s tax cuts made the tax code more progressive
Leading Democratic politicians such as Senate Majority Leader Chuck Schumer, House Speaker Nancy Pelosi, and President Joe Biden have frequently complained that Trump’s tax cuts were nothing more than a 1% giveaway, further rigging the tax code for those at the top. But the biggest unreported fact about the Tax Cuts and Jobs Act (TCJA) is that it actually made the tax code more progressive. Indeed, recent data released by the Internal Revenue Service reveals that the share of income taxes paid by the richest 1% of tax filers increased in the first year of the TCJA, while the share of income tax paid by the poorest 50% of tax filers has declined. These results come directly from an IRS report that breaks down the employee tax share for the 2018 tax year – the first year of taxes filed under the new provisions. Among its changes, the TCJA lowered tax rates, nearly doubled the standard deduction and expanded the child tax credit. IRS data shows that the richest 1% of tax filers, those with adjusted gross income of $ 540,009 or more, paid 40.1% of all income taxes. This amount is almost twice as much as their share of income. Despite the rate cuts under the TCJA, the tax share of the top 1% increased from 2017. In fact, the National Taxpayers Union Foundation has compiled historical data from the IRS tracing the distribution of the tax burden. federal until 1980, and 2018 was the highest share recorded during this period. The richest 10 percent of tax filers, those with adjusted gross income of $ 151,935 or more, paid more than 71 percent of all income taxes. It was also the highest share recorded in available data since 1980. The bottom half of wage earners, whose adjusted gross income was less than $ 43,614, owed 2.9 percent of all taxes. This is a decrease from 3.1% recorded in 2017. The lowest share was recorded in 2010, during the recession, at 2.4%. Similarly, between 2017 and 2018, the number of taxfilers without income tax increased 2.6% to 34.7%. The number of tax-free returns is often linked to the economy: as employment declines and income declines, the number of filers who have no income tax tends to increase, and vice versa . While 2018 was marked by a strong economy that would usually increase the number of people with a tax burden, the TCJA removed additional people from the income tax roll by increasing the standard deduction and expanding refundable credits. We now have a tax code that increasingly protects low-income people from any tax liability and requires individuals to pay an increasing share of taxes as they move up the income ladder. To illustrate how much the progressivity of the tax code has increased over the past 40 years, consider that in 1980, the richest 1% of wage earners bore 19% of income taxes, the richest 10% bore almost half of income taxes, and the bottom 50% paid 7%. It is twice as much as today. Nonetheless, various politicians and experts continue to attack the tax reform law as a regressive giveaway to those who “do not pay their fair share.” But again, under the TCJA, the rich pay a larger share of income tax than at any time in the past four decades, even though the top marginal rate has gone from 70% in 1980 to 37% in 2018. The distribution of income taxes will undoubtedly be at the center of the tax policy debates in the new year. During his campaign, Joe Biden released a tax plan that would raise the top rate to 39.6% and increase corporate tax rates, capital gains and payroll taxes. Other Democrats such as Rep. Alexandria Ocasio-Cortez (D., NY) advocate an income tax rate of 70% or more. This new data from the IRS makes it clear that the TCJA ushered in a significant overall reduction in tax burdens that in fact made the code more progressive, not less. Congress would be wise to remember this when considering future tax reform efforts.
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