Eve, here. Angry Bear brought this Trump tax cut post to my attention and added some graphs from the linked sources, so I’m including them as well. The media has repeatedly pointed out that President Trump’s taxes overwhelmingly benefit the wealthy, but the middle class doesn’t seem to have much complaints about it. Most people prepare easily by taking their own breaks and don’t seem to think too much about the whole program. If our readers hear something different from people in their social circles, please chime in in the comments.
One of the arguments below, which I suspect many people would take issue with, is that eliminating Obamacare’s individual mandates would have a negative impact on low-income workers, as well as tax penalties for not spending money on policies that are too thin. It is said that it is harmful to people. I personally know four low-income people who were bitterly dissatisfied with this penalty before President Trump ended it. Even with subsidies, there was no room to implement the policy, so the “fines” were as punitive as intended.
Written by Beverly Moran, Professor Emeritus of Law, Vanderbilt University. Originally published on The Conversation. Graph provided by Angry Bear
The Tax Cuts and Jobs Act, a package of tax cuts signed by Donald Trump during his first term as president, will expire on December 31, 2024. As Mr. Trump and the Republican Party prepare to negotiate new tax cuts in 2025, there are lessons worth gleaning. From the president-elect’s first set of cuts.
As a percentage of GDP, the 10-year cost of Trump’s tax plan exceeds the four-year cost of every tax cut since the Economic Recovery Tax Act of 1981, the largest tax cut passed in President Ronald Reagan’s first year. exceeds. Percentage of GDP over 4 years. This statement is likely to hold true on an apples-to-apples basis, as the four-year cost (as a percentage of GDP) of President Trump’s tax plan is likely to be similar to or slightly less than the 10-year cost. Is President Trump’s tax cut the biggest since the Reagan administration?
The 2017 cuts were the most sweeping changes to the Internal Revenue Code since the Ronald Reagan administration. The changes range from taxes that businesses pay on foreign income to limits on the deductions that individuals can take for paying state and local taxes.
Although President Trump promised benefits to the middle class at the time, more than 80% of the cuts actually went to corporations, tax partnerships and wealthy individuals. The cost of the U.S. budget deficit is enormous, with the Congressional Budget Office estimating that it will increase by a total of $1.9 trillion from 2018 to 2028. The tax benefits for the middle class were modest.
The advantage for black Americans was even smaller. As a scholar of race and U.S. income taxation, I have analyzed the impact of the Trump tax cuts. We found that this law disadvantaged middle-income, low-income, and Black taxpayers in several ways.
Eliminate worsening inequality
These results are not new. Nearly 30 years ago, when my colleague William Whitford and I used U.S. Census Bureau data to show that black taxpayers with the same income pay more in federal taxes than white taxpayers, they existed. That’s largely because the legacy of slavery, Jim Crow, and structural racism prevents Black people from owning homes.
The federal income tax has many benefits for homeowners that are out of reach for many Black taxpayers. These benefits include the ability to deduct mortgage interest and local property taxes, and the right to avoid taxes on up to $500,000 of the proceeds from the sale of your home.
It’s harder for middle-class black people to get a mortgage than it is for low-income white people. This is true even when comparing black Americans with high credit scores to white Americans with low credit scores.
When black people take out home loans, they are charged higher interest rates than white people.
Trump did not cause these problems. But instead of closing these income and racial disparities, his 2017 tax cuts worsened them.
Black taxpayers paid higher taxes than white taxpayers who were comparable in income, employment, marriage, and other important factors.
Broken promise, broken trust
Fairness is a tenet of American tax policy. A fair tax structure means that people with similar incomes should pay similar taxes and that taxes should not widen income and wealth disparities.
President Trump’s tax cuts contradict both principles.
Supporters of President Trump’s interest rate cuts argued that cutting corporate rates would ripple through to all Americans. This is a fundamental tenet of “supply-side” economics, a philosophy popularized by President Ronald Reagan in the 1980s.
Since the Reagan administration, all tax cuts for the wealthy have been skewed toward the wealthy.
Like previous “trickle-down” plans, President Trump’s corporate tax cuts did not result in higher wages or household incomes. Instead, companies used the excess cash to pay dividends to shareholders and bonuses to executives.
Over the same period, the bottom 90% of wage earners saw no real wage increase. Meanwhile, the labor group AFL-CIO estimates that 51% of corporate tax cuts went to business owners and 10% to each company’s top five highest-paid senior executives. 38% went to the top 10% of salaried earners.
In other words, under President Trump’s tax plan, the income gap between wealthy Americans and everyone else has become much wider.
stock market inequality
The Trump tax cuts also widened racial income and wealth disparities, as corporate tax cuts went primarily to wealthy shareholders rather than being spread across the population.
The reason is simple. In the United States, most shareholders are corporations, pension funds, and wealthy individuals. And the wealthy in the United States are almost exclusively white.
Sixty-six percent of white households own stocks, compared to less than 40 percent of black households and less than 30 percent of Hispanic households. Racial disparities in stock ownership persist even when comparing black and white families with the same income.
These disparities stem from the same historical disadvantages that have led to lower black homeownership rates. Until the Civil War, blacks were virtually unable to own property or enter into contracts. After the Civil War, Negro Laws (laws that specifically controlled and oppressed black people) forced free black Americans to work as farmers and servants.
State prohibitions on black property ownership and public and private theft of black-owned land prevented black Americans from accumulating wealth.
healthcare hit
Still, the Trump tax cuts hurt low-income taxpayers of all races.
One way they did so was to eliminate the individual mandate that required all Americans to purchase basic health insurance. The Affordable Care Act, passed under President Barack Obama, launched new government-subsidized health plans and imposed penalties on people without health insurance.
Approximately 50 million Americans have been covered by the Affordable Care Act since 2014, according to Treasury Department data. After the individual mandate was canceled, 3 million to 13 million fewer people had health insurance in 2020.
The end of this mandate caused a significant drop in health insurance coverage, and research showed that it was primarily low-income people who stopped buying subsidized insurance from the Obamacare exchanges. These are the same people who are most vulnerable to the economic crisis of unpaid medical bills.
Living without insurance hurts all low-income Americans. However, the study found that the reduction in enrollment among black Americans due to President Trump’s plan was greater than the decline in enrollment among white Americans. Following his reassignment, the uninsured rate for Black Americans rose from 10.7% in 2016 to 11.5% in 2018.
The conundrum of the consumer price index
The Trump tax cuts also changed how the Internal Revenue Service calculates inflation adjustments for more than 60 different provisions. These include the Earned Income Tax Credit and the Child Tax Credit (both of which provide cash to low-wage workers), as well as wages on which you have to pay Social Security taxes.
Previously, the IRS used the Consumer Price Index for urban consumers. The index tracked price increases and calculated inflation by comparing increases or decreases in the prices of the same products. The government then used that inflation rate to adjust Social Security payments to qualify for the Earned Income Tax Credit. Use the same numbers to set the amount of income that is taxed at a specific rate.
The Trump tax cuts instead directed the IRS to use the Chained Consumer Price Index for urban consumers to calculate inflation adjustments.
The difference between these two indexes is that the second index assumes that people substitute cheaper goods when prices rise. For example, the chained consumer price index assumes that if the price of beef increases, shoppers will buy pork instead of beef, which reduces the impact of inflation on a family’s overall grocery prices. will be done.
The IRS makes a smaller inflation adjustment based on that assumption. However, low-income areas have less access to the kind of budget-friendly options envisioned by the Chained Consumer Price Index.
And because even middle-class blacks are more likely to live in low-income neighborhoods than poor whites, black taxpayers are hit harder by rising prices.
What was $1 in 2018 is now $1.26. This is an unavoidable and painful hike for black families.
With the Trump tax cuts set to expire, the incoming Republican-led Congress has an opportunity to thoroughly reevaluate their effectiveness. By prioritizing policies that address well-known disparities exacerbated by recent tax changes, lawmakers can work toward a fairer tax system that helps all Americans.
