The 2017 Tax Cuts and Jobs Act (TCJA) failed to deliver on its promises of widespread benefits for U.S. workers and the economy, according to a recent analysis. The TCJA, signed into law by former President Donald Trump, made significant changes to the nation's tax laws, including slashing corporate tax rates and altering the taxation of multinational corporations.
Despite claims from proponents that the tax cuts would lead to increased wages and investment, evidence suggests otherwise. A report highlighted that the benefits of the corporate tax reductions primarily favored the wealthiest households, with little impact on the majority of workers. The top 1 percent of income earners received a significant average tax cut, while those in lower income brackets saw minimal reductions.
Furthermore, research indicated that the corporate tax cuts did not result in increased wages for ordinary workers as predicted. Instead, earnings remained stagnant for most workers, with sharp increases observed for firm managers and executives. The benefits of the tax cuts were found to disproportionately benefit the top earners, with minimal gains for the bottom 90 percent.
Despite expectations that businesses would use the tax savings to invest in growth, corporate investment did not see the anticipated surge following the enactment of the TCJA. Analysts noted that the increase in investment was not as significant as predicted, with additional public investments during the pandemic playing a more substantial role in boosting economic activity.
The TCJA's impact on federal revenues was also examined, revealing that the law's changes to individual and estate taxes were only temporary while those affecting businesses were made permanent. This decision, driven by budget rules, led to a substantial and permanent reduction in federal revenues, with corporate tax collections remaining relatively flat despite increased profits.
Furthermore, the law did not lead to the repatriation of profits held overseas as projected. Dividend payments from foreign affiliates to U.S. parent corporations decreased, and the share of foreign profits shifted to low-tax jurisdictions remained relatively constant. The trade deficit widened following the passage of the TCJA, contrary to claims that the corporate tax cuts would reduce it.
In response to the lack of significant wage increases and investment following the tax cuts, many corporations opted to use their savings for stock buybacks, benefiting shareholders and investors. A substantial portion of the tax savings went towards repurchasing stock, leading to increased share prices and wealth for investors.
Overall, the analysis concluded that the TCJA failed to deliver the promised benefits of increased investment, wage growth, and economic prosperity for the majority of Americans. Instead, the law disproportionately benefited the wealthy and profitable corporations, highlighting the need for reforms to address inequality and ensure equitable distribution of tax benefits.
