Truth be Told:
How Decades of Evidence Prove Tax Cuts Don't Help Working Americans
False Promises: The "One Big Beautiful Bill Act" (OBBBA) would cost $4-5 trillion while adding massive deficits. Despite claims to the contrary, it will not substantially increase growth and wages, arguments Republicans use that have repeatedly proven false for 50 years, in addition to:
1. "Tax Cuts Pay for Themselves" - False, they add to deficits
Trump’s 2017 Tax Cut and Jobs Act (TCJA) led to "nearly dollar-for-dollar revenue losses, even after accounting for increases in economic activity" (Source: Center On Budget and Policy Priorities), adding by some estimates nearly $2.3 trillion to the debt
Revenue as a share of GDP fell from 19.5% before Bush cuts to just 16.3% after Trump cuts
Treasury Secretary Mnuchin's claims that the tax plan would "pay for itself" proved false - federal collections dropped in first three years (2018-2020) (Source: Center for American Progress)
2. "Benefits Trickle Down to Workers" - Failing to do that for 50 years
A London School of Economics study of 18 countries over 50 years found tax cuts for the rich had "no meaningful effect on unemployment or economic growth" but dramatically increased inequality (Source: LSE—my alma mater!)
Despite the name, President’ Trump’s 2017 Tax Cuts and Jobs Act (TCJA) just created more wealth for owners and executives: 49% of gains went to business owners, 11% to executives, only 40% to high-income workers - virtually nothing to average workers (Source: Washington Center for Equitable Growth)
CEOs captured 81% of wage gains from the 2017 TCJA corporate tax cuts (Source: The Roosevelt Institute)
3. "Creates Jobs and Investment" - Savings on taxes were used to buy back stocks
The promised "investment boom failed to occur" - investment rose slower than predicted, then declined (Source: Center for American Progress)
Long-run corporate tax cuts could increase wages by only $750 per worker - "an order of magnitude below" proponents' predictions of 4,000 to 5,000 and most of that went to higher earners (Source: Center on Budget and Policy Priorities)
For the first three quarters of 2018, buybacks were $583.4 billion (up up 52.6% from 2017). (Source: S&P Global)
What OBBBA Actually Does:
Several analyses show that tax benefits will overwhelmingly flow to the top 20% of households (60% of benefits), with top 1% getting 23.5% (Source: Penn Wharton Budget Model)
Would reduce federal revenue by $4.7 trillion and increase deficits by $3 trillion (Source: Tax Foundation)
Meanwhile, Trump's tariffs will amount to "an average tax increase of nearly $1,200 per US household in 2025" (Source: Tax Foundation). Taken together, the bottom 10 percent of households would see an average of 6.5 percent reduction in income, while the top earning households would see an income increase of 1.5 percent. (Source: Yale University Budget Lab)
Instead of a tax cut for the wealthiest Americans policy makers should look at when the United States produced the most growth and economic mobility for the middle and working class: When there was far less income inequality and higher taxes on those at the top.
A focus on facts would benefit our economy and every American. Yet history and the French economist Thomas Picketty contends that every inequitable society creates arguments or ideologies to justify it. Democratic politicians need to stop wringing their hands and start pushing legislation to create a wealth tax like that proposed by Senator Warren in 2019 of 2 percent on households with over $50 million and 3 percent on billionaires, affecting 75,000 households. That would raise revenues of 2.75 trillion over 10 years, reducing the deficit instead of increasing it. It would also better the lives of those at the bottom and barely affect those at the top.