President Joe Biden has proposed $2 trillion in higher taxes on American businesses and workers to fund new federal spending. In announcing this plan, Biden falsely claimed that the 2017 Tax Cuts and Jobs Act (TCJA) passed by the Congressional Republicans and President Trump overwhelmingly benefited “the rich” and large corporations and did little or nothing to help middle class families.
This is not true. The TCJA directly reduced taxes for American middle-class families and grew the economy, increasing wages and creating more job opportunities for Americans.
Even left-leaning media outlets have (eventually) acknowledged the tax cuts benefited middle class families. The Washington Post fact-checker gave Biden’s claim that the middle class did not see a tax cut its rating of four Pinocchios. The New York Times characterized the false perception that the middle class saw no benefit from the tax cuts as a “sustained and misleading effort by liberal opponents.”
Here are some of the ways the TCJA benefited middle-class Americans:
American families and individuals saw strong tax reduction from the TCJA. According to IRS statistics of income data analyzed by Americans for Tax Reform, households earning between $50,000 and $100,000 saw their average tax liability drop by over 13 percent between 2017 and 2018. By comparison, households with income over $1 million saw a far smaller tax cut averaging just 5.8 percent.
This tax reduction was seen in across the country including in key swing states. In Pennsylvania households earning between $50,000 and $100,000 saw their tax liability drop by over 14 percent, while households with incomes over $1 million saw their tax liability drop by just 3.1 percent.
In Ohio, American families with AGI of between $75,000 and $99,999 saw an average reduction in tax liability of 15.3 percent. In contrast, Americans with AGI of $1 million or above saw an average reduction in tax liability of just 0.4 percent.
Thanks to the TCJA, millions of Americans saw an increased child tax credit, and millions more qualified for this tax cut for the first time. The TCJA expanded the child tax credit from $1,000 to $2,000 and raised the income thresholds so millions of families could take the credit. In 2017, 22 million households earning $200,000 or less took the child tax credit. These households received an average tax credit of $1,213.
By 2018, 36 million households earning $200,000 or less took the child and other dependent tax credit. These households received an average credit of $2,002.
The TCJA repealed the Obamacare individual mandate tax by zeroing out the penalty. Prior to the passage of the bill, the mandate imposed a tax of up to $2,085 on households that failed to purchase government-approved healthcare. Five million people paid this in 2017, and 75 percent of these households earned less than $75,000.
The tax cuts grew the economy, leading to more jobs, higher pay, and increased economic opportunity.
Following passage of the tax cuts, the unemployment rate dropped to 3.5 percent in 2019, a 50-year low. In the same year, median household income increased by $4,440 or 6.8 percent, the largest one-year wage growth in history.
This wage growth dwarfed the wage growth experienced under the entire eight years of Barack Obama’s presidency, which was just 5 percent.
Under this economy, there were more job openings than job seekers for 24 consecutive months. In March 2018, the ratio of unemployed persons to job openings dropped to 0.9. It remained at this low level until the pandemic hit America.
This economic prosperity was experienced by key demographics and income levels. For instance, Black and Hispanic Americans saw their median income hit record levels, while the poverty rate declined to 10.5 percent, the lowest rate in decades. The bottom 25 percent of wage earners also experienced wage growth faster than the top 25 percent of wage earners, according to the Atlanta Fed.
Key demographics experienced the growth, including Black Americans, Hispanic Americans, and women, with each group seeing their unemployment rates drop to all-time lows and wage growth increasing by record levels.
The tax cuts resulted in businesses giving their employees pay bonuses, pay raises, increased 401(k) matches, and new employee benefit programs.
Large and small businesses passed the Tax Cut to their Employees
- Wells Fargo raised base wages from $13.50 to $15.00 per hour.
- Apple provided $2,500 employee bonuses in the form of restricted stock.
- Pfizer provided $100 million worth of bonuses to non-executive employees.
- Guy Chemical, a Pennsylvania Based small businesses was able to raise wages, expand bonuses by 50 percent, start a 401(k) retirement program and create 29 new jobs.
- Firebird Bronze, an Oregon-based manufacturer was able to afford to give its nine employees health insurance for the first time.
- Anfinson Farm Store, a family owned business in Cushing, Iowa (population 223) has given its employees a $1,000 bonus and raised wages by 5 percent.
- Five Senses Spa, Salon and Barbershop based in Peoria, Illinois gave $500 bonuses to its 20 employees and provided its employees with health insurance for the first time.
Businesses Created New Employee Benefit Programs
- Walmart and Lowes provided $5,000 to help cover the cost of adopting a child.
- Express Scripts in Missouri created a $30 million education fund for their employees’ children.
- Boeing provided $100 million in workforce development programs
- McDonald’s employees who work just 15 hours a week received $1,500 worth of tuition assistance every year per year.
- Walt Disney announced $50 million in employee educational programs.
- Visa doubled its 401(k) employee contribution match to a maximum of 10 percent of employee pay.
- Cigna spent $30 million on 401(k) matches.
The corporate rate reduction also resulted in lower utility bills, including electric bills, gas bills, and water bills, for American households and businesses in all 50 states.
- In Pennsylvania, at least 17 utility companies passed along savings directly from the corporate income tax cut. As noted by the Pennsylvania Public Utility Commission:
The Pennsylvania Public Utility Commission (PUC) today issued an Order, requiring a “negative surcharge” or monthly credit on customer bills for 17 major electric, natural gas, and water and wastewater utilities, totaling more than $320-million per year. The refunds to consumers are the result of the substantial decrease in federal corporate tax rates and other tax changes under the Tax Cuts and Jobs Act (TCJA) of 2017, which impacted the tax liability of many utilities.
Utilities in Arizona also reduced rates as noted in a June 2018 statement from EPCOR: More than 57,000 EPCOR wastewater customers will receive more than $1.1 million in federal corporate tax cut savings, reducing the amount of their monthly wastewater bill starting with the July 2018 billing cycle.
Today, the Arizona Corporation Commission (ACC) approved EPCOR’s request to refund $1,106,392 in tax reform savings to all of the company’s residential and commercial wastewater customers.
“We are extremely pleased to help our wastewater customers save more than $1 million each year, and it’s important to us that we put this into effect as soon as possible,” commented Joe Gysel, President of EPCOR USA, Arizona’s largest regulated water utility. “All our customers deserve to share in the savings generated by federal tax reform. It’s positive for them, for their communities and for our state.” – June 12, 2018 EPCOR press release
- Georgia businesses and households also saw a significant reduction in utility costs, as noted in a March 2018 statement from Georgia Power:
Georgia Power has completed an assessment of the impact of the Tax Cuts and Jobs Act for the company – including approximately $1.2 billion in benefits for customers. The benefits were confirmed as part of an agreement with Georgia Public Service Commission (PSC) Staff and include approximately $130 million in reduced taxes on financing costs for the Vogtle nuclear expansion; $330 million in direct credits to customers as a result of lower federal income tax rates over the next two years and approximately $700 million in future benefits to be addressed in the company’s next base rate case in 2019, which also includes the benefits of last week’s reduction in state of Georgia income tax rates. If approved by the Georgia PSC, the typical residential customer using an average of 1,000 kilowatt-hours per month could receive approximately $70 in refunds over the two-year period.