New CBO Report Finds TCJA Made Tax Code More, Not Less Progressive

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Posted by Alex Hendrie on Thursday, August 5th, 2021, 4:45 PM PERMALINK

Democrats routinely claim that the Tax Cuts and Jobs Act passed by Congressional Republicans and signed into law by President Trump in 2017 cut taxes for the rich. President Biden, Nancy Pelosi and others have repeatedly called the bill a “tax scam” that did little or nothing for the middle class.

However, new data from the Congressional Budget Office found that the TCJA made the tax code more progressive, not less. The report found that the top one percent of earners and the top 20 percent of earners paid a greater share of income taxes and federal taxes after the TCJA was signed into law:

  • The top one percent of earners paid 38.6 percent of income taxes in 2017 and 41.7 percent of income taxes in 2018.
  • The top 20 percent of earners paid 87.1 percent of income taxes in 2017 and 90.9 percent of income taxes in 2018.
  • The top one percent of earners paid 25.5 percent of all federal taxes in 2017 and 25.9 percent of income taxes in 2018.
  • The top 20 percent of earners paid 69.3 percent of all federal taxes in 2017 and 69.8 percent of federal taxes in 2018.

 

This latest report proves that the claim the TCJA benefited the rich is merely a left-wing talking point. American families at every income level saw strong tax reduction including the middle class.

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.  

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The TCJA repealed the Obamacare individual mandate tax by zeroing out the penalty.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 also resulted in businesses giving their employees pay bonuses, pay raises, increased 401(k) matches, and new employee benefit programs.  

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."  

While Biden and Democrats continue to mislead about the benefits of the TCJA, the fact is, this law reduced taxes for middle class families across the country and made the tax code more, not less progressive.

Photo Credit: Victoria Pickering

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